What a fantastic six months it’s been for Globus Medical. Shares of the company have skyrocketed 62.5%, hitting $94.80. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Following the strength, is GMED a buy right now? Or is the market overestimating its value? 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

In addition to reported revenue, constant currency revenue is a useful data point for analyzing Medical Devices & Supplies - Specialty companies. 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 22.3% year-on-year growth. This performance was fantastic and shows it can expand quickly on a global scale regardless of the macroeconomic environment.

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Globus Medical’s EPS grew at an astounding 22.8% compounded annual growth rate over the last five years. This performance was better than most healthcare businesses.

One Reason to be Careful:

New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

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. Unfortunately, Globus Medical’s ROIC has decreased 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 has huge potential even though it has some open questions, and after the recent surge, the stock trades at 20.8× forward P/E (or $94.80 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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