3 Reasons to Sell OMI and 1 Stock to Buy Instead

Owens & Minor has gotten torched over the last six months - since November 2024, its stock price has dropped 40.4% to $7.09 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is now the time to buy Owens & Minor, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Owens & Minor Not Exciting?

Even with the cheaper entry price, we're swiping left on Owens & Minor for now. Here are three reasons why we avoid OMI and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Owens & Minor’s 3.6% annualized revenue growth over the last five years was tepid. This was below our standard for the healthcare sector.

2. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Owens & Minor historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.8%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Owens & Minor’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

Owens & Minor isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 4× forward P/E (or $7.09 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. We’d suggest looking at one of our all-time favorite software stocks.

Stocks We Would Buy Instead of Owens & Minor

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