Advanced Surgical Adoption Will Drive Powerful Long Term Upside Potential

Catalysts

About Sanara MedTech

Sanara MedTech develops and commercializes advanced surgical and soft tissue repair products that aim to improve clinical outcomes while reducing overall healthcare costs.

What are the underlying business or industry changes driving this perspective?

• Expanding utilization of CellerateRX and BIASURGE across more surgeons, procedures and specialties within already approved facilities supports continued double digit top line growth and greater operating leverage, driving higher revenue and EBITDA.
• Scaling a national hybrid sales model of 40 direct representatives and over 400 independent distributors, without materially increasing headcount, allows Sanara to tap a broader customer base as volumes rise, improving net margins and earnings.
• Growing recognition of the clinical and economic benefits of advanced wound and soft tissue management in complex surgeries, reinforced by new peer reviewed evidence, may support adoption and pricing resilience, and in turn support revenue trends and gross margin strength.
• The planned U.S. launch of OsStic for periarticular fractures, which has Breakthrough Device designation and a large underpenetrated procedure base, offers a new product line that can augment revenue and expand overall earnings power.
• Refocusing capital and management attention away from THP and entirely onto the core Surgical business simplifies operations and reduces noncore cash burn, which may help translate incremental revenue into faster EBITDA and net income growth.

Assumptions

This narrative explores a more optimistic perspective on Sanara MedTech compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Sanara MedTech's revenue will grow by 13.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -6.0% today to 35.1% in 3 years time.
• The bullish analysts expect earnings to reach $52.8 million (and earnings per share of $4.95) by about December 2028, up from $-6.1 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 bullish analyst cohort, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, up from -36.3x today. This future PE is lower than the current PE for the US Medical Equipment industry at 30.1x.
• The bullish analysts expect the number of shares outstanding to grow by 0.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.16%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The wind down of Tissue Health Plus highlights that new platform initiatives may require more capital and longer time frames than anticipated. Future attempts to diversify beyond core surgical products could again fail to attract partners or scale, leading to nonrecoverable cash investment and weaker long term earnings power and net income growth.
• Sanara’s growth strategy depends heavily on sustained expansion of its distributor network and deeper penetration of approved healthcare facilities. If surgeon adoption slows or distributor productivity plateaus in a more mature market, the business could transition from high growth to high single digit growth, pressuring revenue momentum and limiting operating leverage and EBITDA expansion.
• The company is carrying $45.1 million of long term debt, and higher interest and fee expenses are already weighing on other income. A prolonged period of elevated rates or only modest profit growth could constrain balance sheet flexibility, increase refinancing risk and compress future net margins and net income.
• OsStic and other pipeline products are key to sustaining growth beyond the current soft tissue portfolio. OsStic is not expected to launch in the U.S. until 2027 and remains subject to clinical and regulatory uncertainty, meaning any delay, denial or slower than expected uptake would reduce the anticipated diversification of revenue and limit upside to long term earnings.
• Sanara’s portfolio is concentrated in a few core products and relies on premium positioning supported by clinical evidence and cost effectiveness data. If competing wound care or surgical technologies gain share, pricing power erodes or payers push back on reimbursement, the company could face slower volume growth and gross margin compression that undermines the projected expansion in profitability and earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Sanara MedTech is $46.0, which represents up to two standard deviations above the consensus price target of $41.0. This valuation is based on what can be assumed as the expectations of Sanara MedTech's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $46.0, and the most bearish reporting a price target of just $36.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $150.6 million, earnings will come to $52.8 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $24.7, the analyst price target of $46.0 is 46.3% 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.