Varex Imaging (VREX) AI Stock Analysis

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Varex Imaging

(NASDAQ:VREX)

49Neutral

Varex Imaging's overall score reflects significant challenges in financial performance, with declining revenues and profitability issues. Technical analysis indicates a bearish trend, while valuation metrics highlight unprofitability. Despite some positive elements like revenue growth and strong cash management from the earnings call, risks such as the anti-dumping investigation and market uncertainties weigh heavily on the stock's outlook.

Varex Imaging (VREX) vs. S&P 500 (SPY)

Market Cap

$358.03M

Dividend YieldN/A

Average Volume (3M)404.35K

Price to Earnings (P/E)―

Beta (1Y)1.60

Revenue Growth-6.49%

EPS Growth-205.13%

CountryUS

Employees2,300

SectorHealthcare

Sector Strength74

IndustryMedical - Devices

Share Statistics

EPS (TTM)-1.16

Shares Outstanding41,200,000

10 Day Avg. Volume545,046

30 Day Avg. Volume404,346

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.63

Price to Cash Flow (P/CF)13.60

P/FCF Ratio24.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$20.00

Price Target Upside168.10% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Varex Imaging Business Overview & Revenue Model

Company DescriptionVarex Imaging Corporation designs and manufactures X-ray imaging components. The company operates in two segments, Medical and Industrial. The Medical segment designs, manufactures, sells, and services X-ray imaging components comprising X-ray tubes, digital detectors, high voltage connectors, image-processing software and workstations, 3D reconstruction and computer-aided diagnostic software, collimators, automatic exposure control devices, generators, heat exchangers, ionization chambers, and buckys. This segment's products are used in a range of applications, including radiographic and fluoroscopic imaging, mammography, computed tomography, radiation therapy, oncology, CT, cardiac, surgery, dental, computer-aided detection, and other diagnostic radiography uses. The Industrial segment designs, manufactures, sells, and services Linatron X-ray accelerators, X-ray tubes, digital detectors, and high voltage connectors for use in security and industrial inspection applications, such as airport security, cargo screening at ports and borders, and nondestructive testing and examination in various applications. Varex Imaging Corporation sells its products through imaging system original equipment manufacturers, independent service companies, and distributors, as well as directly to end-users. The company has operations in North America, South America, Europe, Russia, the Middle East, India, Africa, Asia, and Australia. Varex Imaging Corporation was founded in 2016 and is based in Salt Lake City, Utah.

How the Company Makes MoneyVarex Imaging generates revenue primarily through the sale of its imaging components to OEMs and direct customers in various industries. Its key revenue streams include the sale of digital detectors and X-ray tubes, which are integral to medical imaging systems such as CT scanners, mammography units, and fluoroscopy systems. Additionally, the company serves the industrial sector by providing components for non-destructive testing and inspection applications. Varex Imaging's earnings are further bolstered by service contracts, repair and maintenance services, and strategic partnerships with leading OEMs and technology providers, which enhance its market reach and product offerings.

Varex Imaging Financial Statement Overview

Summary

Varex Imaging faces challenges with declining revenues and persistent net losses, reflected in a low income statement score. The balance sheet shows improved leverage and liquidity, but cash flow trends are mixed, indicating both potential and risks.

Income Statement

Neutral

The income statement shows a declining revenue trend from 2023 to TTM (Trailing-Twelve-Months), coupled with consistent negative net income, indicating profitability challenges. The gross profit margin remains moderate, but the net profit margin is negative due to recurring losses. EBIT and EBITDA margins are also low, reflecting operational inefficiencies.

Balance Sheet

Neutral

The balance sheet reveals a relatively stable equity base and a decreasing debt-to-equity ratio over time, indicating improved leverage management. However, the equity ratio is moderate, suggesting a balanced but not overly strong financial position. Improving cash reserves and reduced net debt are positive signs.

Cash Flow

Neutral

Cash flow analysis shows a fluctuating free cash flow, with recent growth in free cash flow being a positive indicator. The operating cash flow to net income ratio is favorable, reflecting effective cash generation relative to income. However, cash flow volatility poses a risk to sustained financial health.

TTM	Sep 2024	Sep 2023	Sep 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
820.80M	811.00M	893.40M	859.40M	818.10M	738.30M
	Gross Profit
268.30M	256.90M	290.30M	283.50M	271.50M	190.20M
	EBIT
39.10M	32.10M	77.10M	50.70M	33.40M	-30.90M
	EBITDA
66.40M	67.20M	110.30M	123.60M	112.40M	-1.70M
	Net Income Common Stockholders
-47.50M	-47.70M	48.20M	30.30M	17.40M	-56.60M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
20.60M	200.50M	152.60M	89.40M	144.60M	100.60M
	Total Assets
0.00	1.22B	1.25B	1.18B	1.15B	1.14B
	Total Debt
0.00	470.40M	469.50M	436.40M	459.40M	484.50M
	Net Debt
20.60M	301.70M	316.90M	347.00M	314.80M	383.90M
	Total Liabilities
0.00	667.80M	668.60M	637.70M	651.00M	673.70M
	Stockholders Equity
495.60M	535.10M	567.70M	533.40M	483.30M	451.70M
Cash Flow		Free Cash Flow
23.60M	20.40M	87.70M	-4.40M	77.50M	-10.30M
	Operating Cash Flow
44.20M	47.30M	108.40M	16.90M	92.60M	13.20M
	Investing Cash Flow
-10.60M	-27.50M	-44.90M	-48.40M	-16.20M	-26.90M
	Financing Cash Flow
125.00M	-3.30M	-200.00K	-23.80M	-32.30M	83.60M

Varex Imaging Technical Analysis

Technical Analysis Sentiment

Negative

Last Price7.46

Price Trends

50DMA

12.46

Negative

100DMA

13.62

Negative

200DMA

13.21

Negative

Market Momentum

MACD

-0.39

Positive

RSI

30.17

Neutral

STOCH

7.74

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VREX, the sentiment is Negative. The current price of 7.46 is below the 20-day moving average (MA) of 11.31, below the 50-day MA of 12.46, and below the 200-day MA of 13.21, indicating a bearish trend. The MACD of -0.39 indicates Positive momentum. The RSI at 30.17 is Neutral, neither overbought nor oversold. The STOCH value of 7.74 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VREX.

Varex Imaging Risk Analysis

Varex Imaging disclosed 31 risk factors in its most recent earnings report. Varex Imaging reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Varex Imaging Peers Comparison

Overall Rating

UnderperformOutperform

Sector (48)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ZBH	73 Outperform	$20.87B	23.65	7.24%	0.93%	3.84%	-9.29%
HOLX	71 Outperform	$13.75B	18.50	15.78%	―	1.75%	50.25%
SRTS	68 Neutral	$73.90M	11.24	12.70%	―	71.31%	1277.03%
GEHC	63 Neutral	$27.89B	14.05	25.60%	0.21%	0.61%	43.28%
FONR	63 Neutral	$82.03M	11.12	4.68%	―	-0.83%	-38.41%
VREX	49 Neutral	$358.03M	―	-8.57%	―	-6.49%	-205.13%
Sector *	48 Neutral	$6.36B	1.24	-44.94%	2.70%	18.33%	1.47%

* Healthcare Sector Average

Performance Comparison

VREX

Varex Imaging

8.69

-9.27

-51.61%

FONR

Fonar

12.56

-5.50

-30.45%

HOLX

Hologic

59.31

-18.30

-23.58%

ZBH

Zimmer Biomet Holdings

103.44

-23.16

-18.29%

SRTS

Sensus Healthcare

4.59

1.24

37.01%

GEHC

GE Healthcare Technologies Inc

64.98

-20.28

-23.79%

Varex Imaging Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -50.92% | Next Earnings Date: May 6, 2025

Earnings Call Sentiment Positive

The earnings call reflects a generally positive outlook with notable revenue growth across segments, improved gross margins, and strong cash management. However, challenges such as unscheduled absences impacting demand fulfillment, increased operating expenses, and uncertainty in the China market present notable concerns. Despite these challenges, the positive aspects, especially in revenue and strategic orders in the industrial segment, suggest a favorable position moving forward.

Highlights

Revenue Growth Across Segments

Revenue increased by 5% year over year, with the medical segment growing by 3% and the industrial segment by 10%.

Improved Gross Margin

Non-GAAP gross margin increased to 35%, up from 31% in the same quarter last year, aided by product sales mix and productivity gains.

Strong Cash Management

Cash from operations was $10 million for the quarter, with cash, cash equivalents, and marketable securities totaling $219 million, up $6 million from fiscal 2024 year-end.

China Sales Improvement

Sales in China increased by 7% year over year and 12% sequentially, accounting for 18% of total sales.

Security Inspection Orders

Received additional orders from industrial customers valued at approximately $14 million for cargo inspection systems, contributing to long-term growth opportunities.

Lowlights

Unscheduled Absences Impact

Unscheduled absences during the holidays in US facilities prevented full demand fulfillment, impacting revenue expectations.

Higher Operating Expenses

Operating expenses increased by $4 million compared to the first quarter of fiscal 2024, partially due to a one-time milestone payment and increased expenses in a joint venture.

China Market Uncertainty

Despite improvement, there's no significant clarity on the potential impact of stimulus in China, with sales not yet rebounding to previous highs.

Company Guidance

In the first quarter of fiscal year 2025, Varex Imaging Corporation reported a 5% year-over-year revenue increase, with the medical segment up by 3% and the industrial segment up by 10%. The company's non-GAAP gross margin rose to 35% from 31% in the previous year, benefiting from favorable product sales mix and refunds of German customs duties. Adjusted EBITDA was $24 million, and non-GAAP earnings per share grew to $0.07 from $0.06. Cash generation was strong, with $10 million from operations and a cash balance of $219 million, including $124 million in restricted cash from a senior secured debt offering. The quarter saw significant growth in China sales, up 7% year-over-year, and a notable increase in security inspection product sales within the industrial segment, driven by global demand for security screening. The company also discussed expanded offerings in cargo and security inspection systems, expecting long-term growth in this area. For the second quarter, Varex anticipates revenues between $200 million and $215 million and non-GAAP EPS between $0.05 and $0.20, with a gross margin of 32% to 34%.

Varex Imaging Corporate Events

Legal ProceedingsBusiness Operations and StrategyRegulatory Filings and Compliance

Varex Imaging Faces Anti-Dumping Investigation in China

Negative

Apr 4, 2025

Varex Imaging Corporation is aware of an anti-dumping investigation initiated by China’s Ministry of Commerce concerning imports of certain medical CT X-ray tubes from the United States and India. Although the company has not received formal notice, it plans to cooperate if notified and believes it complies with competition laws, highlighting potential impacts on its operations and market positioning.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.