Owens & Minor, Inc. (NYSE:OMI) and Henry Schein, Inc. (NYSE:HSIC) are both Services companies that recently hit new highs. This price action has ruffled more than a few feathers in the investment community, but is one a better investment than the other? To answer this, we will compare the two companies across growth, profitability, risk, return, dividends, and valuation measures.
Owens & Minor, Inc. (NYSE:OMI) operates in the Medical Equipment Wholesale segment of the Services sector. The company has grown sales at a 2.40% annual rate over the past five years, putting it in the low growth category. OMI has a net profit margin of 1.00% and is less profitable than the average company in the Medical Equipment Wholesale industry. In terms of efficiency, OMI has an asset turnover ratio of 3.41. This figure represents the amount of revenue a company generates per dollar of assets. OMI’s financial leverage ratio is 1.81, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 9.70%, which is worse than the Medical Equipment Wholesale industry average ROE.
Owens & Minor, Inc. (OMI) pays out an annual dividend of 1.03 per share. At the current valuation, this equates to a dividend yield of 3.64%. The company has a payout ratio of 65.20%. OMI’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is -4.34. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 18.02, and is more expensive than the average stock in the Medical Equipment Wholesale industry. The average investment recommendation for OMI, taken from a group of Wall Street Analysts, is 3.80, or a underperform.
Over the past three months, Owens & Minor, Inc. insiders have been net buyers, dumping a net of -13,591 shares. This implies that insiders have been feeling relatively bearish about the outlook for OMI. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. OMI has a beta of 1.07 and therefore an above average level of market volatility.
Henry Schein, Inc. (NASDAQ:HSIC) operates in the Medical Equipment Wholesale segment of the Services sector. HSIC has increased sales at a 6.30% CAGR over the past five years, and is considered a medium growth stock. The company has a net profit margin of 4.60% and is less profitable than the average Medical Equipment Wholesale player. HSIC’s asset turnover ratio is 1.75 and the company has financial leverage of 1.17. Company is therefore mostly financed by equity capital. HSIC’s return on equity of 19.30% is better than the Medical Equipment Wholesale industry average.
The company trades at a free cash flow yield of 1.52 and has a P/E of 25.38. Compared to the average company in the 12.96 space, HSIC is relatively expensive. The average analyst recommendation for HSIC is 2.10, or a buy.
Henry Schein, Inc. insiders have sold a net of 0 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, HSIC’s beta of 1.11 indicates that the stock has an above average level of market risk.
Owens & Minor, Inc. (NASDAQ:HSIC) scores higher than Henry Schein, Inc. (NYSE:OMI) on 8 of the 11 measures compared between the two companies. HSIC has the better fundamentals, scoring higher on growth, profitability, leverage and return metrics. HSIC has better insider activity and sentiment signals.