This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

February 26, 2010 - OSI Systems, Inc. (OSIS-NASDAQ) together with its subsidiaries, designs, manufactures, and sells specialized electronic systems and components for applications in homeland security, healthcare, and defense and aerospace markets worldwide. It operates in three divisions: Security, Healthcare, and Optoelectronics and Manufacturing.

The Healthcare division provides patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems under the Spacelabs name. These products are used in critical care, emergency, and perioperative areas within hospitals, physician's offices, medical clinics, and ambulatory surgery centers.

The Optoelectronics and Manufacturing division designs, manufactures, and markets optoelectronic devices under the OSI Optoelectronics name. It also provides electronics manufacturing services under the OSI Electronics name for a range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, computed tomography, telecommunications, office automation, computer peripherals, and industrial automation. In addition, this division designs toll and traffic management systems under the OSI LaserScan name and systems for measuring bone density under the Osteometer name. OSI Systems, Inc. was founded in 1987 and is headquartered in Hawthorne, California.

This is a small company with sales of $590 million in fiscal year 2009 (ends June 30). But it's growing in all the right places. While earnings were down for the last year (going from 78 cents to 63 cents) consensus from 5 analysts is for $1.31 this year, then $1.65 next year, mostly because of renewed demand for its anti-terror products.

The attempted terrorist attack last Christmas aboard a plane bound for Detroit was a wake-up call for many airlines globally. Several of them have heightened security measures with new orders for scanning and screening machines that OSI makes.

Backlog at the company is at record levels with $240 million of orders on the books as of December 31. The Security division accounted for $164 million of the order book. That's also a new record. An example of the kind of contracts the company is booking: a 10-year cargo scanning agreement with the Puerto Rico Ports Authority. Another: $35 million of baggage screening equipment in Mexico airports. OSI is currently in talks with their government on a $173 million order for advanced screening systems.

The Healthcare division is facing tougher times. Its focus is on small and mid-sized hospitals and outpatient clinics. While there are good growth opportunities in these markets, with the current economic slump, sales will be slow until there is a recovery.

More numbers: Price to sales ratio is .92 while Price to book is 1.78. Book value is $16.50. Operating margin for the last 12 months was 5.35%. Profit margin was 2.88%. Return on Equity was 5.91%. There's $27.6 million in cash or $1.55 per share. Total debt is $38.51 million or about 10% of capital. Current ratio is 2.58. Beta is .92. 52-week low was $13.86 on March 9, 2009. 52-week high was $32.58 on January 11, 2010. There are 17.77 million shares outstanding with a Float of 15.91 million. Insiders own 26.92% of the stock. Institutions have 67.70%. There is no dividend.

OSIS is an exciting stock. Its price action has been stellar with a gain of over 100% in less than a year. Sales are ramping in the Security division. Earnings are set to double this year. Aggressive investors will want to spend more time with this one.

One more thing: The Chairman and CEO is Dr. Deepak Chopra. But not the guru. Same name. Different person.

- Company Web site: www.osi-systems.com

- Ted Allrich