Nortech Systems Inc (NASDAQ: NSYS)

Sector: Healthcare Industry: Medical Devices CIK: 0000722313
Market Cap 26.82 Mn
P/B 0.80
P/E -10.21
P/S 0.23
ROIC (Qtr) 0.46
Div Yield % 0.00
Rev 1y % (Qtr) -2.95
Total Debt (Qtr) 21.10 Mn
Debt/Equity (Qtr) 0.63
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About

Nortech Systems Inc., referred to as NSYS, is a company that operates in the Medical, Aerospace and Defense, and Industrial markets. It specializes in providing engineering design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies, and components. The company has a diverse customer base, with manufacturing facilities located in the United States, Mexico, and China. Nortech Systems' main business activities involve offering a range of value-added engineering, technical, and manufacturing services....

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Investment thesis

Bull case

  • Strong tangible asset base of 74.60M provides 3.54x coverage of total debt 21.10M, indicating robust asset backing and low credit risk.
  • Retained earnings of 16.23M provide full 2.16x coverage of long-term debt 7.51M, indicating strong internal capital position.
  • Tangible assets of 74.60M provide robust 8.95x coverage of other current liabilities 8.34M, indicating strong asset backing.
  • Cash reserves of 1.27M provide solid 4.43x coverage of other non-current liabilities 287000, indicating strong liquidity.
  • Retained earnings of 16.23M provide strong 101.41x coverage of intangibles 160000, indicating quality earnings retention.

Bear case

  • With cash reserves of 1.27M against inventory of 18.43M, the 0.07 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Investment activities of (305000) provide weak support for R&D spending of 1.19M, which is -0.26x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • The company's operating cash flow of (2.07M) shows concerning coverage of stock compensation expenses of 496000, with a -4.18 ratio indicating potential earnings quality issues.
  • Free cash flow of (2.38M) provides weak coverage of capital expenditures of 305000, with a -7.79 ratio suggesting additional external financing needs for growth initiatives.
  • Operating cash flow of (2.07M) provides minimal -3.88x coverage of tax expenses of 534000, suggesting potential tax planning inefficiencies or unsustainable tax positions.

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Medical Devices
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ABT Abbott Laboratories 173.80 Bn 32.73 5.47 12.94 Bn
2 SYK Stryker Corp 141.15 Bn 43.48 5.62 15.86 Bn
3 MDT Medtronic plc 123.47 Bn 25.92 3.55 29.10 Bn
4 BSX Boston Scientific Corp 112.80 Bn 38.92 5.62 11.44 Bn
5 EW Edwards Lifesciences Corp 45.66 Bn 33.38 7.76 0.70 Bn
6 DXCM Dexcom Inc 27.52 Bn 32.91 5.90 1.34 Bn
7 STE STERIS plc 24.13 Bn 34.08 4.14 2.05 Bn
8 PODD Insulet Corp 17.33 Bn 70.38 6.87 1.01 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.63 2.13
EV to Cash from Ops. EV/CFO -22.77 2.75
EV to Debt EV to Debt 2.24 17.25
EV to EBIT EV/EBIT -40.92 2.89
EV to EBITDA EV/EBITDA 275.90 4.53
EV to Free Cash Flow [EV/FCF] EV/FCF -19.85 29.36
EV to Market Cap EV to Market Cap 1.76 25.09
EV to Revenue EV/Rev 0.40 32.80
Price to Book Value [P/B] P/B 0.80 4.73
Price to Earnings [P/E] P/E -10.21 -2.04
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 40.22
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 1.59
Dividend per Basic Share Div per Share (Qtr) 0.00 0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 -0.37
Interest Coverage Int. cover (Qtr) -1.23 196.93
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 73.10 -152.08
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 2.58 8,476.58
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.44
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -126.15 -792.16
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -96.96 3.79
EBIT Growth (1y) % EBIT 1y % (Qtr) -131.09 -301.80
EBT Growth (1y) % EBT 1y % (Qtr) -168.87 -121.44
EPS Growth (1y) % EPS 1y % (Qtr) -156.89 -87.51
FCF Growth (1y) % FCF 1y % (Qtr) 48.20 10.43
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -23.95 38.21
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.56 0.55
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.04 1.80
Current Ratio Curr Ratio (Qtr) 1.76 4.18
Debt to Equity Ratio Debt/Equity (Qtr) 0.63 1.20
Interest Cover Ratio Int Coverage (Qtr) -1.23 196.93
Times Interest Earned Times Interest Earned (Qtr) -1.23 196.93
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 0.10 -2,396.63
EBIT Margin % EBIT Margin % (Qtr) -0.99 -2,478.60
EBT Margin % EBT Margin % (Qtr) -1.79 -2,690.42
Gross Margin % Gross Margin % (Qtr) 13.50 30.80
Net Profit Margin % Net Margin % (Qtr) -2.30 -2,821.53