Omnicell (OMCL)

Healthcare tech company Omnicell (NASDAQ:OMCL) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 10% year on year to $310.6 million. On top of that, next quarter’s revenue guidance ($311 million at the midpoint) was surprisingly good and 5.2% above what analysts were expecting. Its non-GAAP profit of $0.51 per share was 40.7% above analysts’ consensus estimates.

Company Overview

Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ:OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.

The healthcare technology sector provides software and data analytics to help hospitals and clinics streamline operations and improve patient outcomes, often through value-based care models. Future growth is expected as providers prioritize digital transformation to manage rising costs and patient demands. Tailwinds include the adoption of AI-driven tools and government incentives for digitization. There challenges as well, including long sales cycles and slow adoption by providers, who may be resistance to change. Tightening hospital budgets and cybersecurity threats are additional risks that could slow adoption.

Omnicell's competitors include BD (Becton, Dickinson and Company) (NYSE:BDX) with its Pyxis medication dispensing systems, Baxter International (NYSE:BAX) with its DoseEdge IV workflow solutions, and privately-held companies like ARxIUM and Swisslog Healthcare that offer pharmacy automation systems.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $1.18 billion in revenue over the past 12 months, Omnicell is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Omnicell grew its sales at a mediocre 5.7% compounded annual growth rate. This fell short of our benchmark for the healthcare sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Omnicell’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Product. Over the last two years, Omnicell’s Product revenue averaged 4.6% year-on-year declines. This segment has lagged the company’s overall sales.

This quarter, Omnicell reported year-on-year revenue growth of 10%, and its $310.6 million of revenue exceeded Wall Street’s estimates by 5%. Company management is currently guiding for a 1.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and suggests its newer products and services will not lead to better top-line performance yet.

Omnicell was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.3% was weak for a healthcare business.

Analyzing the trend in its profitability, Omnicell’s operating margin decreased by 7.7 percentage points over the last five years, but it rose by 5.7 percentage points on a two-year basis. Still, shareholders will want to see Omnicell become more profitable in the future.

In Q3, Omnicell generated an operating margin profit margin of 2.7%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Omnicell, its EPS declined by 5.4% annually over the last five years while its revenue grew by 5.7%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Omnicell’s earnings to better understand the drivers of its performance. As we mentioned earlier, Omnicell’s operating margin was flat this quarter but declined by 7.7 percentage points over the last five years. Its share count also grew by 5.1%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q3, Omnicell reported adjusted EPS of $0.51, down from $0.56 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Omnicell’s full-year EPS of $1.82 to shrink by 9.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Omnicell has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.3% over the last five years, better than the broader healthcare sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Omnicell’s margin dropped by 12 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Omnicell’s free cash flow clocked in at $13.99 million in Q3, equivalent to a 4.5% margin. This cash profitability was in line with the comparable period last year but below its five-year average. In a silo, this isn’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Omnicell historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

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. Over the last few years, Omnicell’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Omnicell reported $180.1 million of cash and $194.9 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $149.5 million of EBITDA over the last 12 months, we view Omnicell’s 0.1× net-debt-to-EBITDA ratio as safe. We also see its $17.09 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Omnicell beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its EPS guidance for next quarter missed and its EBITDA guidance for next quarter fell slightly short of Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 8.3% to $32 immediately after reporting.

Updated: December 4, 2025 at 10:38 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Omnicell.

We cheer for all companies helping people live better, but in the case of Omnicell, we’ll be cheering from the sidelines. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its declining adjusted operating margin shows the business has become less efficient.

Omnicell’s P/E ratio based on the next 12 months is 23x. At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $47.33 on the company (compared to the current share price of $39.57).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.