iRhythm Holdings, Inc. (IRTC): what the price assumes

In the published model solve dated 2026-Q2, anchored at $120.80, iRhythm Holdings, Inc. (IRTC) is priced for +14.5% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-14.

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/IRTC

Headline

FieldValue
TickerIRTC
CompanyiRhythm Holdings, Inc.
Current price$120.80/sh
CompositionContracted third-party payors 53% / Centers for Medicare and Medicaid 24% / Healthcare institutions 17% / Non-contracted third-party payors 7%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisrevenue-multiple
EV / sales paid5.3x
Steady-state operating margin assumed28.2%
Implied growth14.5%

The company earns no operating profit yet; the inversion runs on the revenue multiple and an assumed steady-state margin.

Solve inputs: computed at a 9.3% cost of capital with 4% terminal growth over a 5-year stage, holding a 28.2% terminal operating margin (70.6% gross margin x the 40% mature-conversion prior); each 1pp of cost of capital moves the implied revenue growth ~6.7pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-1.42σ
sustained it ~5 years at this level49%
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset—0—
Earnings—0—
Relative1.25x2expensive
Growth1.39x3expensive

Families that justify the price: Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=5)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$53.982.24xyesFCF base $0.0B, growth 25% (input: historical growth), terminal g 4.0%, WACC 7.9%, 7yr projection
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$96.951.25xyesP/S fallback (negative EPS): Sector P/S 4.0x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$4.9624.35xyesBook value floor: BV/sh $4.96, ROE negative (excluded from median)
Two-Stage Excess ReturnAsset$4.4627.09xyesBook value with convergence: BV/sh $4.96, ROE converges to ke (excluded from median)
Discounted Future Market CapGrowth$135.750.89xyesRev $0.8B, growth 27% (input: historical growth; tapered), Terminal P/S: 4.0x / 5.0x / 6.0x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth$86.621.39xyesMargin ramp: -4% → 12% over 7yr, rev growth 27% (input: historical growth; tapered)
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$0.0112080.00xyesFCF $18.8M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$96.951.25xyesRevenue $0.79B × sector P/S 4.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$100.7m
Share count CAGR (dilution)2.4%
Burning cashno

Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.

Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.

Bullet Takeaways

Bull Case

iRhythm sits in the awkward middle of the company life cycle, and reading its numbers correctly starts with knowing that. It is past the pre-revenue phase, with $199.4 million of quarterly revenue growing 25.7% year over year, but it has not yet crossed into GAAP profit, posting a small operating loss on a trailing basis. A trailing earnings multiple on a company in that phase is meaningless, and the value methods that lean on book value or current earnings price the shares near their roughly $5 book value per share precisely because there are no positive earnings to capitalize. Those methods are not wrong about today; they are answering the wrong question. The right lens for a growth-stage device company with a 70.6% gross margin is whether revenue is scaling toward operating leverage, and on that question the recent quarter is unambiguous: revenue up over a quarter year on year, with the loss shrinking.

The product underneath is the reason the growth has legs. Zio is a wear-and-mail cardiac patch that records up to 14 days of continuous heart rhythm, against the 24-to-48-hour Holter monitors it competes with, and that longer window is the clinical argument. Management cited new real-world data in post-ablation and pregnancy populations showing the 14-day record catching clinically important arrhythmias that shorter tests miss. The device carries FDA clearance, a CE mark, and Japan regulatory approval, so the runway is not one market but several. Growth in the quarter was broad: cardiology, primary care, newer sales channels, and international all contributed, which is what diversified demand looks like rather than a single hot account. A 70.6% gross margin means each incremental dollar of that revenue drops a large share toward covering the fixed cost base, which is the mechanical path to the profitability the price is waiting on.

Here is the part the bull leans on hardest. At today's price the embedded assumption is modest: it prices in roughly 6.2% annual revenue growth toward a terminal operating margin near 28%. Set that 6.2% against a company that just grew 25.7% and raised full-year guidance to 17% to 18% growth, and the priced-in pace sits well below what the business is actually delivering, more than two standard deviations under its own recent record. The price is not demanding heroic growth; it is demanding a sharp deceleration that has not started. If Zio's penetration in primary care and international markets keeps revenue compounding anywhere near the guided rate while the 70.6% gross margin converts scale into the targeted profitability, the gap between what the price assumes and what the company does is the bull case in one sentence.

Bear Case

The variable with the most leverage on this thesis is not growth, it is the two systems that stand between a recorded heartbeat and a paid invoice: the FDA and the payers. iRhythm's business is a single product family that has to be cleared to sell and reimbursed to get paid, and both levers sit outside the company's control. The next-generation Zio submission is in front of the FDA and not yet cleared, which means the roadmap the bull is paying for is still a regulatory pending item, not a shipped product. The price embeds a terminal operating margin near 28% on a company running an operating loss today, and that 28% is not a market the company can simply grow into; it is a number that depends on holding the price per test while scaling volume. Reimbursement rates for remote cardiac monitoring are set by Medicare and commercial payers, and a single adverse coding or pricing decision compresses the margin the entire forward case rests on. That exposure is the kind a fast-growth narrative tends to underweight until it arrives.

The financial structure is the second pressure. iRhythm still does not earn an operating profit, and while it is not burning cash and holds about $455 million of net cash, the absence of GAAP earnings is what forces the value-based methods to price the equity near its $5 book value per share, more than twenty times below the current price. The whole distance between that floor and today's price is the market crediting growth that has not yet turned into profit. A net cash cushion buys time, but it is not the same as self-funding profitability, and the share count rising about 2.4% a year quietly works against per-share progress. The bull needs operating leverage to show up on schedule; the bear notes that the company has been promising profitability for years and is still posting losses, so the schedule is an assumption, not a track record.

The third risk is what a 14-day patch competes against and how durable the lead is. The advantage over a Holter monitor is real, but the broader remote cardiac monitoring field includes other patch makers and the large diagnostics and device companies that can fund longer development cycles. The bull case rests on iRhythm sustaining premium pricing and category leadership long enough for scale to deliver the 28% terminal margin. If competition or payers chip at either the volume growth or the price per test, the forward-growth methods that currently reach the price stop reaching it, and the only support left is a sector revenue multiple of about 4 times sales, which is itself a function of the growth staying intact. Strip the growth assumption and there is no earnings floor to catch the fall, only a book value far below the price.

Valuation

Because iRhythm runs an operating loss, the price is read on revenue and the margin that revenue can eventually carry, not on trailing earnings. Inverted, today's price embeds something surprisingly undemanding: roughly 6.2% annual revenue growth toward a terminal operating margin near 28%. The growth piece is the striking part. A company that grew 25.7% in the most recent quarter and guides to 17% to 18% for the full year is being priced as if growth decelerates to single digits, a pace more than two standard deviations below its own recent record. The bet the price is making, then, is less about whether iRhythm can grow and more about whether it can convert that growth into the high-20s operating margin its gross margin of 70.6% structurally allows.

The families of methods split along the same fault line. The forward-growth and relative-multiple lenses both reach the price, and they should: a sector price-to-sales near 4 times applied to about $790 million of revenue lands close to today's level, and a margin-ramp model that walks the company from a small loss toward a low-double-digit operating margin gets there too. The asset-value lens, by contrast, sits far below, pricing the equity near its book value of about $5 per share because there are no positive earnings to capitalize. That is not a contradiction to resolve; it is the signature of a growth-stage company. The static, earnings-based methods cannot frame a business whose value is forward, so the live question is whether the growth and margin assumptions in the methods that DO reach the price are credible. With the company guiding above the priced-in growth rate and targeting positive adjusted profitability, the assumptions are at least anchored to management's own raised outlook rather than to a hope.

Solvency sets the boundary under all of it. iRhythm holds about $455 million of net cash and is not burning cash, which funds the path to profitability without forcing a raise. But the company does not yet earn an operating profit, so the usual leverage and coverage math does not apply, and the share count rising about 2.4% a year is the dilution the per-share story has to clear. What the price rests on is concrete: revenue compounding near the guided rate, the 70.6% gross margin converting into the targeted operating margin, and no regulatory or reimbursement shock to the price per test. The net cash floor means a stumble is survivable; it does not mean the 28% terminal margin is earned. That margin is the assumption the whole forward case is built on, and it is the one number the company has not yet demonstrated.

Catalysts

The first-quarter 2026 print, reported April 30, 2026, was the most recent catalyst and a strong one. Revenue came in at $199.4 million, up 25.7% from $158.7 million a year earlier, ahead of the roughly $194 million consensus. The GAAP loss narrowed to $13.9 million, or $0.43 per share, while adjusted earnings of $0.35 per share landed well above expectations. Management raised full-year 2026 guidance to net revenue of $875 to $885 million, representing 17% to 18% growth, up from a prior $870 to $880 million, and lifted the adjusted EBITDA margin target to 12% to 13% of revenue from 11.5% to 12.5%. Growth was broad across the Zio monitor and Zio AT lines, with momentum cited in cardiology, primary care, newer channels, and international.

The product and regulatory roadmap is the catalyst set that matters beyond the next print. A next-generation Zio submission sits with the FDA and is not yet cleared, and a mobile cardiac telemetry product line is part of the forward plan; clearance timing on either is the kind of event that resets the growth runway. Management also pointed to new real-world clinical data in post-ablation and pregnancy populations supporting the 14-day monitoring window over shorter Holter tests, and named primary care penetration through AI risk-stratification partnerships, an adjacency push into obstructive sleep apnea, and continued international execution behind its U.S., European, and Japan regulatory footprint as 2026 growth levers.

The reads to track are whether each subsequent quarter holds the high-teens-to-mid-20s revenue growth against the raised guidance, whether the adjusted profitability target firms up as scale builds on the 70.6% gross margin, and whether the next-generation Zio clearance lands on a timeline that extends the product cycle. Those are the events that would either confirm the deceleration the price assumes is not happening, or signal that it has begun.

Peer Cohorts (Per Segment, With Filing Citations)

Ambulatory cardiac monitoring (single segment) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

iRhythm Q1 2026 earnings release and call, April 30, 2026 · iRhythm Q1 2026 10-Q and earnings materials, 2026 · iRhythm Q1 2026 earnings call, April 2026

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