Rising Tariffs Will Pressure Margins But Modest Recovery Will Follow

Key Takeaways

• Aggressive industry cost controls and large competitors' pricing power threaten AngioDynamics' margins and ability to capitalize on secular market growth.
  
• Innovation and international gains are offset by regulatory risks, rising costs, and dependence on flat legacy product revenues.
  
• Ongoing tariff and regulatory uncertainties, flat Med Device growth, and delayed reimbursement threaten AngioDynamics' margin improvement, profitability, and ability to achieve sustained top-line expansion.

Catalysts

A medical technology company, designs, manufactures, and sells medical, surgical, and diagnostic devices for the use in treating peripheral vascular disease, and oncology and surgical settings in the United States and internationally.

• While AngioDynamics is benefiting from strong secular demand drivers like the aging population and rising prevalence of chronic diseases which should support long-term revenue growth in minimally invasive devices aggressive cost containment by public and private payers could pressure reimbursement rates, limiting the extent of topline expansion even in robust end-markets.
  
• Although the company is capitalizing on the procedural shift toward minimally invasive interventions with differentiated platforms such as Auryon and AlphaVac, heightened global regulatory scrutiny and unpredictable tariff environments are likely to increase development costs and delay time-to-market for next-generation products, negatively impacting R&D productivity, gross margins, and potentially near-term earnings.
  
• Despite a successful transformation into higher-growth, higher-margin Med Tech markets and a robust pipeline evidenced by repeat double-digit revenue growth in flagship products, AngioDynamics' scale lags larger competitors, leaving its net margins and long-term earnings at risk from continued pricing pressure by Group Purchasing Organizations and large healthcare providers.
  
• While international expansion and recent regulatory approvals (for example, CE mark in Europe for Auryon and reimbursement codes for NanoKnife) create new sales avenues that could drive incremental revenue, supply chain disruptions from de-globalization and ongoing geopolitical tensions expose AngioDynamics to elevated manufacturing costs and potential distribution hurdles, putting pressure on overall earnings quality.
  
• Even as ongoing portfolio optimization and operational efficiencies, including manufacturing transfer initiatives, are expected to drive margin expansion, persistent reliance on legacy Med Device revenues (now relatively flat year over year) and the risk that innovation momentum slows may cause revenue to stagnate and limit sustainable EPS improvement over the long term.

AngioDynamics Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on AngioDynamics compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming AngioDynamics's revenue will grow by 7.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -11.6% today to 3.4% in 3 years time.
• The bearish analysts expect earnings to reach $12.2 million (and earnings per share of $0.29) by about September 2028, up from $-34.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 64.9x on those 2028 earnings, up from -12.8x today. This future PE is greater than the current PE for the US Medical Equipment industry at 29.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.43%, as per the Simply Wall St company report.

AngioDynamics Future Earnings Per Share Growth

Risks

• Ongoing tariff uncertainty and increased trade barriers introduced significant cost headwinds in fiscal year 2025, with estimated impacts rising from $1.6 million in the fourth quarter to a projected $4 million to $6 million for fiscal 2026, potentially compressing gross margins and lowering future EBITDA and net earnings.
  
• While Med Tech is driving growth, AngioDynamics' Med Device segment, which provides steady cash generation, showed flat growth and may face stagnation, indicating a reliance on mature or low-growth markets that could limit revenue expansion and threaten overall margin improvement if not offset by sustained innovation in Med Tech.
  
• The company continues to report adjusted net losses, albeit reduced, and forecasts another year of adjusted losses per share in fiscal 2026, suggesting that profitability remains elusive and may constrain the company's ability to fund R&D or pursue acquisitions without external capital, thereby limiting potential earnings growth.
  
• The slow pace of reimbursement adoption and the complexity of the landscape for new products like NanoKnife, which, despite regulatory and reimbursement milestones, may face a delayed ramp in market penetration, potentially throttling the anticipated revenue inflection and affecting both short
• and long-term top line expectations.
  
• Heightened regulatory scrutiny is evident, particularly for new product features such as the blood return version of AlphaVac, where ongoing FDA discussions and the lack of an established approval pathway create uncertainty that could delay market entry and impact the realization of forecasted revenue streams.

Valuation

• The assumed bearish price target for AngioDynamics is $16.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of AngioDynamics's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $24.0, and the most bearish reporting a price target of just $16.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $359.5 million, earnings will come to $12.2 million, and it would be trading on a PE ratio of 64.9x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $10.73, the bearish analyst price target of $16.0 is 32.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.