Omnicell: The Autonomous Pharmacy

12/01/2020 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Clinicians spend lots of time searching for and counting meds due to outdated, error-prone manual drug dispensaries, observes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Omnicell (OMCL) has a better way, with its tech-enabled autonomous pharmacy improving workflows by helping clinicians safely and securely deliver proper drug doses to the right patient at the right time.

Its flagship product, the Omnicell XR2, uses robotics to package and sort drugs to reduce handling time by pharmacists and reduce expired medication waste.

Its XT automated dispensing cabinet improves medicine tracking and regulatory compliance while reducing inventory costs. And its business software uses predictive analytics to optimize medical supply management so clinicians can focus on patient care.

While Omnicell’s business was impacted by COVID, its customers began returning to normal business in Q3, driving significant increases in new customer wins and bookings. Revenue of $214 million was down 7% from a year ago (though revenues increased 7% sequentially).

Management is encouraged by the strength in bookings and the ability to grow its backlog and sees better times ahead, with the top brass thinking Q4 revenue will increase 13% sequentially; and analysts see 2021 revenue up 17%.

Plus, longer-term, the top brass reaffirmed its 11% annual organic growth rate (usually a bit higher with some M&A here and there).

Thus, Omnicell offers investors both a recovery story as investors look ahead to a lessening of the pandemic as well as a long-term, reliable growth story—both of which should keep big investors interested.

Technically, OMCL has been in a long-term uptrend for years, but has also suffered through many multi-month dips and rest periods along the way.

The latest of those lasted two full years (no net progress from September 2018 to September 2020), but now OMCL is freewheeling, with shares up eight weeks in a row (a sign of persistent accumulation) to all-time highs. We advise looking to buy on the next retreat.

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