VREX

Varex is a classic cheap-but-cyclical component supplier, and the headline numbers are worse than the underlying business. FY2025 revenue of $845M grew 4.1% and gross profit actually rose 13.1% to $291M (gross margin 34.4%), yet the company reported a -$70.3M net loss and -3.3% operating margin. The dominant driver of that red ink is not operations but a $93.9M non-cash goodwill impairment on the Medical reporting unit, which management took after a 'sustained decrease in our stock price,' a lower market cap, and tariff-driven downward revisions to its long-term forecast. Strip that one-time charge out and the picture flips to modestly profitable — corroborated by positive operating cash flow of $41.7M. At a market cap of $442M and P/S of 0.5, you are paying half of sales for a cash-generative business, which is why this isn't a sell.

What holds it back from a buy is a genuine, unresolved macro overhang layered on a mediocre growth and balance-sheet profile. The MD&A is explicit that bilateral US-China tariffs 'impacted our results of operations and profitability in fiscal year 2025' and are 'expected to make our products less competitive.' China's MOFCOM opened two investigations in April 2025 into imported X-ray tubes and CT tubes/inserts — products tied to roughly 10% of total revenue. Those probes were indefinitely suspended in November 2025, but management notes that if recommenced they could take ~a year to resolve, so this is a suspended risk, not a closed one. Meanwhile revenue is still below its FY2023 peak of $893M, retained earnings have turned negative (-$5.9M), and the company carries $366M of long-term debt against $145M cash (liabilities/equity 1.31x).