GMED Is Producing Cash, What Is Holding You Back?
Here is why we think Globus Medical (GMED) is worth a look
- Cash Yield: Not many stocks offer free cash flow yield of 7.2%, but GMED does
- Fundamentals: 3-Year average revenue growth of 40.4% and operating margin of 14.5% show good fundamentals
- Valuation: While tad expensive at PE of 38.8, the combo of cash yield, growth, and margin could still get noticed
- Compared to S&P, while you get higher valuation, you further get higher revenue growth, but lower margins
Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For quick background, Globus Medical provides healthcare solutions for musculoskeletal disorders and orthopedic trauma treatment, including fracture plates, compression screws, intramedullary nails, and external fixation systems worldwide.
| GMED | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Health Care Equipment | – |
| Free Cash Flow Yield | 7.2% | 3.9% |
| Revenue Growth LTM | 32.3% | 5.0% |
| Revenue Growth 3YAVG | 40.4% | 5.8% |
| Operating Margin LTM | 11.5% | 18.8% |
| Operating Margin 3YAVG | 14.5% | 17.7% |
| PE Ratio | 38.8 | 23.5 |
But do these numbers tell the full story? Read Buy or Sell GMED Stock to see if Globus Medical still has an edge that holds up under the hood.
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
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The Point? The Market Can Notice, And Reward
Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months
- FFIV gained 70% in a year after showing a 6.9% free cash flow yield
- CSCO had 6.6% yield, and returned 50% in the next 12 months
- PM rose over 85% percent as the market noticed its 5.7% free cash flow yield and good underlying revenue growth
But Consider The Risk
GMED isn’t immune to big drops either. It fell about 34% during the 2018 correction, took a 41% hit in the Covid pandemic, and dropped nearly 48% in the inflation shock. Even with good fundamentals, these dips show the stock can get hit hard when the market turns. Strong businesses still face tough sell-offs in turbulent times.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read GMED Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.