Masimo Q3 Earnings: Is NasdaqGS:MASI Expensive at 58.4x Price/EPS?

in EARNINGS/INVESTING IDEAS by

Masimo Corporation (NasdaqGS:MASI) is scheduled to report Q3 earnings results after markets close for trading on October 27, 2020.

The company is expected to report earnings of $0.62/share on revenue of $259.3 million. The consensus earnings per share (EPS) of $0.62/share is based on a poll of 8 analysts and represents a decline in eps of −18.6% over the same quarter last year, when the company reported earnings of $0.76/share.

The revenue forecast of $259.3 million based on a poll of 7 analysts implies a year-over-year (YoY) growth in revenue of 13.2%. Last year the company reported $229 million in revenue for the quarter.

Expected to report EPS contraction of −18.6% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $259.30 $229.01 13.2%
EPS $0.62 $0.76 −18.6%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Masimo Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.79 $0.85 7.9% Beat
Q1, 2020 $0.91 $0.97 6.7% Beat
Q4, 2019 $0.87 $0.91 4.5% Beat
Q3, 2019 $0.73 $0.76 4.5% Beat
Q2, 2019 $0.73 $0.76 3.4% Beat
Q1, 2019 $0.75 $0.79 5.1% Beat
Q4, 2018 $0.73 $0.83 14.2% Beat
Q3, 2018 $0.69 $0.71 3.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price reacted by falling −7.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $235.71 $218.77 −7.2% Decline
April 28, 2020 $214.33 $212.95 −0.6% Decline
February 19, 2020 $181.49 $181.81 0.2% Increase
October 30, 2019 $148.04 $145.79 −1.5% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.08, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.08 implies a 1.9% chance of earnings manipulation.

Fundamentals And Technical Analysis

Masimo Corporation is currently trading at $236.33/share, up 0.3% for the day. The company is trading at approximately 91.6% of its 52-week high of $258/share. The company’s stock price is up 8.0% since the last earnings report and up 1.9% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 58.58 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:MASI Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 58.43 and a forward P/E multiple of 68.91.

Masimo Corporation’s current share price also implies a price-to-book (P/B) multiple of 9.66. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 27, 2020
Stock Price (Current) $236.33
P/E Ratio 58.4x
P/E Ratio (Fwd) 68.9x
PEG Ratio 5.5
Total Debt / Total Capital 0.2%
Levered Free Cash Flow $154.6 million
EV / EBITDA 45.7x

Finbox

Masimo Corporation is a large-cap stock with a market capitalization of $12.986 billion and a total enterprise value of $12.331 billion. The company operates in the Healthcare sector and the Healthcare Equipment & Supplies industry.

Masimo Corporation, a medical technology company, develops, manufactures, and markets noninvasive monitoring technologies and hospital automation solutions worldwide. The company offers Masimo Signal Extraction Technology (SET) pulse oximetry with measure-through motion and low perfusion pulse oximetry monitoring to address the primary limitations of conventional pulse oximetry. It also provides Masimo rainbow SET platform that includes rainbow SET Pulse CO-Oximetry products that noninvasively monitor hemoglobin species, including oxygen saturation, pulse rate, perfusion index, pleth variability index, and respiration rate from the pleth; noninvasively monitor hemoglobin concentration, and carboxyhemoglobin and methemoglobin; monitor arterial oxygen saturation and acoustic respiration rate; and calculates oxygen content and oxygen reserve index. In addition, the company offers SedLine brain function monitoring technology to measure the brain’s electrical activity by detecting EEG signals; capnography and gas monitoring products comprising external plug-in-and-measure capnography and gas analyzers, integrated modules, handheld capnograph and capnometer devices, and capnography sampling lines; and O3 regional oximetry for tissue oxygen saturation measurement. Further, it provides Patient SafetyNet, a surveillance, remote monitoring, and clinician notification solution; MyView, a wireless presence-detection system; and connectivity devices. Additionally, the company offers Trace, a patient data visualization and reporting software for Masimo Root and Radical-7 monitors. The company provides its products directly, as well as through distributors and original equipment manufacturers partners to hospitals, emergency medical service providers, physician offices, home care providers, long term care facilities, veterinarians, and consumers. Masimo Corporation was founded in 1989 and is headquartered in Irvine, California.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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