Investors looking for opportunities in the healthcare sector may find Varex Imaging Corporation (NASDAQ: VREX) an intriguing prospect. Despite challenges reflected in its recent financial performance, the company’s stock currently offers a potential upside of 100.97%, making it worth a closer examination.
**Company Overview**
Varex Imaging Corporation, headquartered in Salt Lake City, Utah, is a prominent player in the medical devices industry. The company specializes in designing, manufacturing, and selling X-ray imaging components through its Medical and Industrial segments. Its medical products are integral to various diagnostic radiography applications, while the industrial segment supports security and inspection functions worldwide.
**Current Market Position**
Varex holds a market capitalization of approximately $342.9 million, with shares currently trading at $8.26. The stock has experienced significant volatility, with a 52-week range between $6.88 and $16.68. This volatility presents potential entry points for investors as the stock hovers near the lower end of its annual range.
**Valuation and Performance Metrics**
The company reports a forward P/E ratio of 11.09, suggesting that investors are pricing in expectations of future earnings growth. Despite a lack of clarity on trailing P/E and PEG ratios, the forward-looking metrics indicate potential value.
However, Varex’s recent performance metrics reveal challenges. With a return on equity of -7.17% and an EPS of -1.03, the company is currently operating at a loss. On a positive note, revenue growth of 3.20% and a free cash flow of $53.39 million indicate that Varex is generating cash, which could support future investments and debt management.
**Analyst Ratings and Potential Upside**
Analysts remain optimistic, with four buy ratings and one hold rating, and no sell recommendations. The consensus target price averages at $16.60, with a high estimate of $23.00, implying a potential upside of over 100% from the current price. This optimistic outlook reflects confidence in the company’s strategic direction and potential for market recovery.
**Technical Indicators**
From a technical perspective, Varex’s stock is underperforming in terms of its moving averages, with the 50-day moving average at $8.49 and the 200-day moving average at $12.08. The relative strength index (RSI) of 27.94 suggests that the stock is oversold, potentially signaling a buying opportunity for contrarian investors.
**Investment Considerations**
While Varex Imaging faces operational challenges, its strong cash flow and diverse product offerings in critical healthcare and industrial applications offer a foundation for growth. The company’s global reach and strategic partnerships with original equipment manufacturers and distributors support its long-term potential.
For investors with a higher risk appetite, Varex’s current pricing and potential upside present an opportunity to gain exposure to a company with essential products in the growing medical devices market. However, it’s crucial to monitor developments in the company’s financial performance and market conditions that could impact its recovery trajectory.
As always, investors should conduct thorough due diligence, considering both the risks and opportunities before making informed investment decisions in Varex Imaging Corporation.
