The thesis

Varex Imaging Corporation develops X-ray imaging components with a gross margin of 33.55%. The company's revenue growth is 1.5% year-over-year, with a conviction score of 44. Analysts have a buy consensus rating, despite a net margin of -96.4%. This setup is interesting due to the significant margin pressure and low conviction score.

Why now

The current macro context, including China's chip tool push and the US-China squeeze, makes VREX's situation more compelling. The company's low conviction score and negative net margin make it a critical moment to assess its prospects.

What to watch

Investors should monitor VREX's revenue growth and margin expansion over the next quarter to assess its ability to recover from current pressures. The company's upcoming earnings report will be crucial in confirming or denying the thesis, particularly if it provides guidance on improving profitability.

Key risks

Valuation risk is a concern due to VREX's negative price-to-earnings ratio of -6.3x. Execution risk is also present, given the company's struggle to maintain profitability. Macro risk from the US-China trade tensions may further impact VREX's business.