TransMedics Group, Inc. (TMDX): what the price requires
At today's price, TransMedics Group, Inc. (TMDX) is priced for 4.9% operating margins for ~6.6 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-11 · Source: https://boothcheck.com/report/TMDX
Headline
| Field | Value |
|---|---|
| Ticker | TMDX |
| Company | TransMedics Group, Inc. |
| Sector / Industry | Healthcare / Medical Devices |
| Current price | $71.12/sh |
| Composition | Net product revenue 62% / Service revenue 39% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.9% |
| Operating margin today | 14.9% |
| Margin compression implied | -10.0pp |
| Must persist for | 6.6y |
| Multiple paid | 29x operating income |
The operating-margin requirement is derived from the framework's value band at year 5, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.8 years.
How unusual the bet is: elevated (limited comparison data)
| Reference | Value |
|---|---|
| sustained it ~6.6 years at this level | 33% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; earnings-power say expensive.
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.35x | 5 | expensive |
| Earnings | 1.51x | 5 | expensive |
| Relative | 1.01x | 5 | expensive |
| Growth | 0.60x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.0%, WACC 9.0%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $265.15 | 0.27x | yes | FCF base $0.2B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.0%, 7yr projection |
| DCF Exit Multiple | Growth | $118.67 | 0.60x | yes | Exit EV/EBITDA: 17.1x / 20.1x / 23.1x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $97.98 | 0.73x | yes | P/E 24x (sector median), scenarios: 19.2x / 24.0x / 28.8x (bear / base = sector held flat / bull), EV/EBITDA 16x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $52.78 | 1.35x | yes | BV/sh $13.65, ROE (TTM) 34.8%, ke 9.0% |
| Two-Stage Excess Return | Asset | $111.03 | 0.64x | yes | 5yr excess ROE then converge to ke=9.0% |
| Discounted Future Market Cap | Growth | $104.38 | 0.68x | yes | Rev $0.6B, growth 30% (input: historical growth; tapered), Terminal P/S: 3.2x / 4.0x / 4.9x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $52.44 | 1.36x | yes | EPS $4.37, growth 2% (input: historical EPS growth), PEG=7.49 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $15.69 | 4.53x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.01B × (1−14%) / WACC 9.0% → EPV (no growth) |
| Residual Income | Asset | $82.60 | 0.86x | yes | BV $13.65 + 5yr PV of (ROE (TTM) 34.8% − Kₑ 9.0%) × BV; BV grows 8.5%/yr |
| Graham Number | Asset | $36.63 | 1.94x | yes | √(22.5 × EPS $4.37 × BVPS $13.65) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $59.16 | 1.20x | yes | EBITDA $0.11B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $58.63 | 1.21x | yes | FCF $151.4M / Kₑ 9.0% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $47.01 | 1.51x | yes | SBC-adj FCF $0.11B (FCF $0.15B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $141.01 | 0.50x | yes | EPS $4.37 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $32.54 | 2.19x | yes | BV $13.65 × (ROIC 21.4% / WACC 9.0%) |
| P/Sales Sector | Relative | $70.28 | 1.01x | yes | Revenue $0.64B × sector P/S 4.0x |
| PEG Fair Value | Relative | $163.88 | 0.43x | yes | EPS $4.37 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $47.24 | 1.51x | yes | EPS $4.37 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $335.6m |
| Net debt / NOPAT (after-tax) | 4.12x |
| Net debt / operating income (pre-tax) | 3.55x |
| Interest coverage | 5.4x |
| Share count CAGR (dilution) | 6.7% |
| Burning cash | no |
Bullet Takeaways
- TransMedics pairs a razor-blade device model, single-use organ-specific disposables on its OCS consoles per the FY2025 10-K, with an owned aviation and logistics network built for a market where donor organs can surface at any hospital at any time.
- Profitability inverted while revenue grew: the latest quarter's revenue rose 21.2% year over year while operating margin fell from 23.2% to 7.6% across four quarters, and the 10-K now lists Terumo-backed OrganOx, XVIVO, and Paragonix as rivals in organ preservation.
- Management reiterated FY2026 revenue guidance of $727 to $757 million after the first-quarter earnings miss; the second-quarter print around early August is the first checkpoint on whether margins stabilize.
Bull Case
Watch where the cash is going. Capital spending quadrupled from $9.1 million to $36.7 million per quarter over the past year while the company kept generating $151.4 million of trailing free cash flow, and that spending is not maintenance; it is the deliberate build-out of the aviation and logistics layer no competitor has. The FY2025 10-K explains why the network matters in a sentence: transporting organs, clinical staff, and technology is uniquely hard because donor organs may become available at almost any hospital at any time. A device maker sells a box. TransMedics is spending its own cash flow to become the service that shows up at 3 a.m. with the aircraft, the clinical team, and the perfusion technology, which is a moat measured in logistics infrastructure rather than patents alone.
The underlying economics being reinvested are unusually good. Revenue grew 21.2% year over year last quarter to $173.9 million, the model runs on recurring single-use disposable sets per the 10-K, gross margin still exceeds 58%, and trailing return on equity is 34.8% on a balance sheet with almost no leverage, debt at 0.03x equity and a 6.74 current ratio. The 10-K also notes the quiet network effect in the customer base: transplant surgeons who move to new centers carry their OCS experience with them, seeding new accounts. Management reiterated FY2026 revenue guidance of $727 to $757 million, 20% to 25% growth, even while absorbing the cost pressures that crushed the quarter's earnings.
And the stock now prices the growth far more cheaply than it did. After falling roughly 30% around the May print to near its 52-week low, the shares trade where the peer-multiple methods read the price as fair and the growth-crediting methods read it as below what they support. The margin bar embedded in the valuation is strikingly low, roughly a 4.9% operating margin in the out-years against the 14.9% the trailing record shows, so the price leans on growth persisting, not on margins expanding. A company guiding to 20%-plus growth, self-funding its infrastructure, with the earnings bar set below what it already clears on the trailing record, is a growth story on sale for the sin of one expensive quarter.
Bear Case
The moat is being chipped at from both ends, and the company's own filing names the chisels. For years the OCS effectively had warm perfusion to itself; the FY2025 10-K now describes OrganOx, acquired by Terumo Corporation in October 2025, offering warm perfusion for the liver, XVIVO Perfusion in the lung, and Paragonix cold preservation devices across the field, and it concedes that many alternative providers have "greater name recognition, significantly greater financial resources". A Terumo-scale parent behind the liver competitor matters specifically because liver is TransMedics' largest volume driver, and cold-storage boxes that cost a fraction of an OCS flight-and-perfusion service put a ceiling on pricing for the marginal transplant center.
The erosion is already visible in the P&L. Across the last four quarters gross margin slid from 61.4% to 58.2%, operating margin collapsed from 23.2% to 7.6%, and the March 2026 quarter delivered net income down 71.5% year over year on revenue up 21.2%; adjusted EPS of $0.30 came in at half the $0.62 consensus, and the stock fell roughly 25% on the print. Free cash flow went negative in the latest quarter as capex ramped. The aviation strategy that differentiates the company also industrializes its cost base: the 10-K flags dependence on third-party ground handling, fueling, and maintenance providers and warns that significant increases in aviation fuel costs could hurt results. Running an airline is a famously hard way to make money, and TransMedics has chosen to run one inside a medical device company.
The headline valuation flatters the situation. The trailing 15x earnings multiple rests on a December 2025 quarter that produced $2.59 of EPS at a 65.5% net margin in a quarter where operating margin was 13.2%; the gap came from below the operating line, not from the business, and the very next quarter earned $0.20. Price the company on its operating trajectory instead and the earnings-power methods read the price at 1.5x what they support. Add the 10-K's disclosed dependence on a limited number of customers for a significant portion of revenue, a share count that is still rising, and a grey-zone composite solvency score, and the priced-in requirement, growth held near its self-funding ceiling for about seven years, historically sustained by only about a third of comparable growers, starts to look like the optimistic branch rather than the base case.
Valuation
What today's price is betting: at about 29x company-wide operating income, the market needs operating growth held near the self-funding ceiling for roughly seven years, a persistence only about 33% of comparable fast growers have sustained. The offsetting fact is that the valuation's margin ask is undemanding, about a 4.9% operating margin in the out-years against the 14.9% the trailing record earns, so the bet is concentrated entirely on growth duration. Revenue guidance of $727 to $757 million for 2026, 20% to 25% growth, is exactly the pace the price requires; the question the methods argue over is how many more years of it follow.
The families split down the middle at $71.12 (July 11, 2026). Peer multiples read the price as fair at 1.0x what they support, and the growth-crediting methods read it as cheap at 0.6x. Earnings power reads it at 1.5x and asset-based methods at 1.3x. One reconciling clause is essential: the trailing 15.0x P/E against a 24x sector median overstates the cheapness, because trailing earnings include a December 2025 quarter whose 65.5% net margin far exceeded its 13.2% operating margin, a below-the-operating-line gain rather than recurring earnings; the earnings-power skepticism is priced off the operating trend instead, where margin fell from 23.2% to 7.6% across the year. The filing-sourced inputs behind the growth case are the recurring disposable-set revenue model the 10-K describes and the latest quarter's $173.9 million of revenue, up 21.2%.
Solvency is a strength with one asterisk. Debt is nominal at 0.03x equity, the current ratio is 6.74, leverage is well covered, and trailing free cash flow of $151.4 million yields 5.9% on the $2.57 billion market value; the asterisk is trajectory, with the latest quarter's free cash flow negative at $12.1 million as capital spending on the logistics fleet quadrupled. The decisive variable is the operating margin line: if the first quarter's 7.6% is the cost of scaling the aviation network ahead of guided growth, the growth methods have it right; if it is the new competitive equilibrium, the earnings-power read wins, and the seven-year growth requirement gets harder each quarter it persists.
Catalysts
The second-quarter report, due around late July or early August on the company's usual cadence, is the immediate event, and it carries a specific burden: proving the first quarter's margin collapse was investment rather than erosion. Management reiterated FY2026 revenue guidance of $727 to $757 million after the miss, so the top line is underwritten by the company itself; the watch items are gross margin, which slid to 58.2% amid supply-chain cost pressure, operating expense growth against the 21.2% revenue pace, and whether free cash flow returns to positive as the quarter's $36.7 million capex surge digests. A second consecutive quarter of sub-10% operating margin would shift the debate from timing to structure.
The competitive calendar runs in parallel. Terumo's October 2025 acquisition of OrganOx, disclosed in the FY2025 10-K's competition section, puts a global medtech distribution machine behind the rival liver perfusion system, and evidence of share pressure in liver, TransMedics' largest organ line, would be the most damaging single development. Commercial expansion of the aviation fleet and any disclosed utilization metrics for the national logistics program cut the other way, deepening the service moat the capex is buying. The stock's reset near its 52-week low after the roughly 25% post-earnings decline means expectations are as low as they have been in the company's public life; with sentiment split between growth-story defenders and margin skeptics, each print between now and year-end is positioned to move the shares hard in either direction.
Peer Cohorts (Per Segment, With Filing Citations)
TransMedics (OCS organ transplant) (reported)
- AORT (ARTIVION, INC.)
- FY2025 10-K: Net Health ("LifeNet") and LeMaitre Vascular ("LeMaitre"), offer preserved human heart valves and patches in competition with us. We believe that we compete favorably on the basis of surgeon preference, documented clinical data, technology, and customer service, particularly with respect to the capabilities of our…
- FY2025 10-K: …of safe implantable human tissue without simultaneously reducing the risk of Mtb transmission. We also believe the Guidances are unnecessary in light of new Mtb screening criteria the American Association of Tissue Banks ("AATB") recently implemented. Industry and the clinician community worked with CBER to have the…
- PEN (Penumbra, Inc)
- FY2025 10-K: …products is attractive to our customers. Since our founding in 2004, we have invested heavily in our product development and commercial expansion that has established the foundation of our global organization. We have successfully developed, obtained regulatory clearance or approval for, and introduced products into…
- FY2025 10-K: …Catheters. Either Penumbra ENGINE or Penumbra Pump MAX is connected to our reperfusion catheters and provides the aspiration suction force. We developed our proprietary aspiration source as a fully-integrated system specifically for mechanical thrombectomy by aspiration. Embolization and Access Products Peripheral…
- ATRC (AtriCure, Inc.)
- FY2025 10-K: …AtriClip FLEX-Mini device and EnCompass clamp meaningfully contributed to our growth in 2025. There are limited competitors in our key markets; however, new entrants are developing and marketing competing products, procedures, and/or clinical solutions that may cause variability in our results. Highlights of the…
- FY2025 10-K: …the body of clinical evidence. We believe publication of additional scientific evidence, in addition to robust ongoing research activities, will ultimately create an increased demand for our products. Build Physician and Societal Relationships. We have formed consulting relationships with cardiothoracic surgeons,…
- GMED (GLOBUS MEDICAL, INC.)
- FY2025 10-K: …to increase the amount of surgical volume performed locally. Additionally, we offer flexibility to customers for our capital equipment within our Excelsius ® ecosystem by offering capital sales and leasing arrangements. Intellectual Property We protect our proprietary rights through a variety of methods. In…
- FY2025 10-K: …in sufficient quantities so that products are available when needed for surgical procedures. Safety stock levels are determined based on a number of factors, including demand, manufacturing lead times, and quantities required to maintain service levels. Surgical Instrument, Implant Sets and Equipment Sales For many…
- IRTC (iRhythm Holdings, Inc.)
- FY2025 10-K: …with our revenue growth and gross accounts receivable. Additionally, through our revenue cycle management transformation we have focused our efforts in part on resolving payor claims denials and unpaid portions of patient-responsible balances in a more timely manner. We believe that our current cash, cash…
- FY2025 10-K: …for the iRhythm ACM Systems, new therapeutic discoveries, development of an analytical engine for ambulatory consumers, other medical data and payor and provider decision support, and the potential for more complete system integration with large health systems. We have supported clinical studies conducted by leading…
- PODD (INSULET CORPORATION)
- FY2025 10-K: …development efforts, including choice of smartphone integration and CGM with Omnipod 5 and enhancing the customer experience through digital product and data capabilities. We are currently working to integrate Omnipod 5 with Abbott's FreeStyle Libre 3 Plus and developing Omnipod 6, our next generation AID product.…
- FY2025 10-K: …/s/ Wayne A.I. Frederick, M.D. Wayne A.I. Frederick, M.D. Director /s/ Jessica Hopfield Jessica Hopfield Director /s/ Michael R. Minogue Michael R. Minogue Director /s/ Robert L. Huffines Robert L. Huffines Director /s/ Timothy J. Scannell Timothy J. Scannell Director /s/ Timothy C. Stonesifer Timothy C. Stonesifer…
- INSP (Inspire Medical Systems, Inc.)
- FY2025 10-K: …world. • Improve the customer experience. We believe that by enhancing interconnectivity, simplifying the care pathway, and closely tracking outcomes, we can optimize the customer experience and improve therapy adherence. We have invested in initiatives that we believe will drive higher quality patient flow to reduce…
- FY2025 10-K: …on our Inspire therapy. Our U.S. customers are generally reimbursed for the cost of patient treatment by various third-party payors, such as commercial insurance providers and Medicare. We have secured positive coverage policies with many U.S. commercial payors, including all large national commercial insurers,…
- LIVN (LivaNova PLC)
- FY2025 10-K: …cardiopulmonary products, including HLMs, oxygenators, autotransfusion systems, perfusion tubing systems, cannulae, and other related accessories, and provides services related to certain of these products. In particular, the Cardiopulmonary segment includes the Essenz Perfusion System, the Company's next-generation…
- FY2025 10-K: …in modifications to LivaNova's reportable segments. Specifically, LivaNova's former ACS segment is now included in "Other," excluding the ACS standalone cannulae and accessories business, which is now included in the Cardiopulmonary reportable segment. As a result, LivaNova now has two reportable segments:…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
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
Q1 2026 earnings release, May 2026 · earnings coverage, May 2026 · Q1 2026 earnings coverage, May 2026 · Q1 2026 earnings coverage · Seeking Alpha coverage, May 2026