ICU Medical has had an impressive run over the past six months as its shares have beaten the S&P 500 by 9.3%. The stock now trades at $182.79, marking a 23.3% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in ICU Medical, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is ICU Medical Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are three reasons you should be careful with ICUI, plus one stock we’d rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. ICU Medical’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.5% over the last two years. 
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
ICU Medical’s EPS grew at an unimpressive 2.9% compounded annual growth rate over the last five years, lower than its 11.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Haven’t Paid Off Yet
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
ICU Medical historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.9%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.
Final Judgment
ICU Medical isn’t a terrible business, but it doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 20.6× forward P/E (or $182.79 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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