Global Aging And Healthcare Demand Will Expand Medical Procedures

Key Takeaways

• Strong product innovation, acquisitions, and expanding global presence position Merit to capture growth from increased demand for minimally invasive medical procedures.
  
• Operational efficiency, regulatory support, and new product launches drive margin expansion and set the stage for above-industry revenue performance.
  
• Delays in product reimbursement, rising global trade risks, weak international sales, increased operating costs, and reliance on vulnerable premium products threaten growth and profitability.

Catalysts

Designs, develops, manufactures, and markets single-use medical products for interventional, diagnostic, and therapeutic procedures in the United States and internationally.

• The expanding global prevalence of chronic diseases and an aging population are increasing the need for interventional, diagnostic, and therapeutic medical procedures-Merit's strong growth in cardiovascular and endoscopy segments, robust new product development, and recent acquisitions (such as Biolife and EndoGastric) position the company to capture a larger share of this growing market and drive sustained long-term revenue growth.
  
• Rising healthcare spending and the global shift toward minimally invasive procedures support higher procedure volumes; with WRAPSODY CIE's unique offering and premium positioning, along with robust clinical evidence and FDA breakthrough designation, Merit stands to benefit from adoption tailwinds that will positively impact future revenues as reimbursement is secured.
  
• Continued international expansion, notably leveraging existing Merit sales infrastructure to launch Biolife products outside the U.S. and capitalize on underpenetrated markets in EMEA and APAC, should further diversify and accelerate top-line growth over the next several years.
  
• Ongoing investments in operational efficiency, manufacturing automation, and product portfolio expansion through innovation and strategic M&A are driving improved gross and operating margins (evidenced by record 21% non-GAAP operating margin), supporting higher cash flow and net earnings.
  
• Regulatory support for medical device innovation-including NTAP approval and ongoing CMS engagement for WRAPSODY CIE-alongside successful cross-selling of new product lines into existing channels, establish strong long-term catalysts for above-peer revenue growth and margin expansion once reimbursement uncertainties resolve.

Merit Medical Systems Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Merit Medical Systems's revenue will grow by 6.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.3% today to 11.0% in 3 years time.
• Analysts expect earnings to reach $193.0 million (and earnings per share of $3.09) by about August 2028, up from $119.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 41.7x on those 2028 earnings, down from 42.8x today. This future PE is greater than the current PE for the US Medical Equipment industry at 27.3x.
• Analysts expect the number of shares outstanding to grow by 1.74% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.84%, as per the Simply Wall St company report.

Merit Medical Systems Future Earnings Per Share Growth

Risks

• The company disclosed a two-quarter delay securing key outpatient reimbursement (APC/TPT) for their WRAPSODY CIE product due to errors in the filing process; failure or further delay in obtaining reimbursement could materially slow anticipated revenue growth and limit WRAPSODY's contribution to earnings in the near-to-medium term.
  
• Tariffs and evolving global trade tensions, especially with regard to US-China relations and uncertainty around future retaliatory actions or regulatory changes, remain a significant unknown; these could materially raise cost of goods sold, compress gross and operating margins, and reduce net earnings.
  
• China revenue, a major component of international sales, declined 6% due to macroeconomic softness and persistent volume-based purchasing (VBP) headwinds; ongoing weakness or increased competition in APAC may dampen international top-line growth and hurt overall revenue targets.
  
• Operating expenses accelerated (SG&A up 13%, R&D up 24% year-over-year), partly from acquisitions and expansion, and if revenue growth or acquisition integration underperforms, such spending could undermine future profitability and pressure earnings per share.
  
• The company's growth remains partly reliant on newly acquired or core product lines and premium pricing strategies (e.g., WRAPSODY CIE), which are exposed to risks of reimbursement pushback, price competition, or technological obsolescence-any of which could erode revenue, market share, and margin expansion over time.

Valuation

• The analysts have a consensus price target of $103.545 for Merit Medical Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $122.0, and the most bearish reporting a price target of just $90.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $193.0 million, and it would be trading on a PE ratio of 41.7x, assuming you use a discount rate of 7.8%.
• Given the current share price of $86.15, the analyst price target of $103.55 is 16.8% 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.