Over the last six months, Globus Medical’s shares have sunk to $74.94, producing a disappointing 10.3% loss - a stark contrast to the S&P 500’s 21.4% gain. This may have investors wondering how to approach the situation.

Following the drawdown, is now a good time to buy GMED? Find out in our full research report, it’s free.

Why Does Globus Medical Spark Debate?

With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE: GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.

Two Positive Attributes:

1. Constant Currency Revenue Propels Growth

Investors interested in Medical Devices & Supplies - Specialty companies should track constant currency revenue in addition to reported revenue. This metric excludes currency movements, which are outside of Globus Medical’s control and are not indicative of underlying demand.

Over the last two years, Globus Medical’s constant currency revenue averaged 20.7% year-on-year growth. This performance was fantastic and shows it can expand quickly on a global scale regardless of the macroeconomic environment.

2. Increasing Free Cash Flow Margin Juices Financials

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.

As you can see below, Globus Medical’s margin expanded by 8 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Globus Medical’s free cash flow margin for the trailing 12 months was 24%.

One Reason to Be Careful:

New Investments Fail to Bear Fruit as ROIC Declines

We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.

On average, Globus Medical’s ROIC decreased by 4.2 percentage points annually each year over the last few years. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.

Final Judgment

Globus Medical’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 14.6× forward P/E (or $74.94 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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