QuidelOrtho (QDEL): Should You Buy, Sell, or Hold After Q4 Results?

QuidelOrtho’s Recent Stock Performance: An Investor’s Dilemma

In the last half-year, QuidelOrtho’s stock price has dropped by 19.9%, falling to $22.11 per share. This decline stands in stark contrast to the S&P 500, which saw a 6.6% increase during the same period. Such underperformance may leave investors questioning their next steps.

Is QuidelOrtho a potential bargain, or does it pose a threat to your investment portfolio?

Reasons We Expect QuidelOrtho to Lag Behind

Despite the stock’s lower valuation, we remain cautious about QuidelOrtho’s outlook. Below are three key concerns that make us wary of QDEL, along with an alternative stock we prefer.

1. Revenue Declines in Constant Currency Signal Weak Demand

For companies in the Medical Devices & Supplies sector, it’s important to consider constant currency revenue, which strips out the effects of currency fluctuations and better reflects true demand. Over the past two years, QuidelOrtho’s constant currency revenue has shrunk by an average of 3.8% annually. This downward trend hints at intensifying competition or a saturated market. To reignite growth, the company may need to cut prices or invest more in product innovation—moves that could weigh on short-term earnings.

2. Free Cash Flow Margin Continues to Erode

At StockStory, we place a strong emphasis on free cash flow, as it represents the cash a company can actually use—unlike accounting profits. Over the last five years, QuidelOrtho’s free cash flow margin has fallen by 21.9 percentage points. This ongoing decline may indicate the company is in the midst of heavy investment. For the most recent 12 months, its free cash flow margin stood at negative 3%.

3. Investments Aren’t Delivering as ROIC Drops

Return on invested capital (ROIC) measures how efficiently a company generates operating profit from its total capital. While we favor businesses with robust returns, the direction of ROIC is often what surprises investors and drives share prices. Unfortunately, QuidelOrtho’s ROIC has seen a notable decrease in recent years. Although management has made strong moves in the past, the falling returns could point to a lack of lucrative growth opportunities.

Our Verdict

QuidelOrtho does not meet our standards for a high-quality investment. After its recent drop, the stock trades at a forward price-to-earnings ratio of 10.5 (or $22.11 per share). This valuation suggests that much optimism is already reflected in the price, and better opportunities are available elsewhere. We suggest considering one of our top picks in digital advertising instead.

Alternative Stocks Worth Considering

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