Regulatory And Reimbursement Issues Will Limit Revenue While Operations Stabilize

Key Takeaways

• Unresolved reimbursement issues and market reliance may hinder Zynex's sales growth and margin stability despite demographic and regulatory tailwinds.
  
• Regulatory uncertainty, operational challenges, and financial pressures threaten successful execution and sustainable earnings improvement.
  
• Mounting payment uncertainty, drastic cost cuts, weak product pipeline, and financial instability undermine future growth, margin prospects, and market position.

Catalysts

Designs, manufactures, and markets medical devices to treat chronic and acute pain, and activate and exercise muscles for rehabilitative purposes with electrical stimulation.

• While the aging population and increasing preference for non-opioid pain management are likely to expand Zynex's addressable market, ongoing reimbursement pressure-highlighted by the unresolved TRICARE payment suspension-may limit both near-term revenue recovery and long-term pricing power, potentially restricting top-line growth even as demographic tailwinds remain strong.
  
• Despite regulatory momentum favoring accurate and non-biased patient monitoring devices-which positions the upcoming NiCO pulse oximeter as a breakthrough product-uncertainty around FDA clearance timelines and the risk of unforeseen regulatory hurdles could result in protracted development cycles and muted earnings contributions from new products.
  
• Although cost-restructuring and operational streamlining are expected to improve net margins over the coming quarters, persistent healthcare budget constraints and payer controls may counteract these gains, making it difficult for Zynex to sustainably grow earnings without a material acceleration in top-line sales.
  
• While the push into home healthcare with portable, patient-administered devices aligns with industry trends supporting volume growth, Zynex's heavy reliance on electrotherapy exposes the company to risk should there be a shift in standard of care or increased adoption of digital, integrative, or lower-cost alternatives-jeopardizing long-term revenue diversification and margin stability.
  
• Although further innovation in connected, wearable medical technology should help differentiate Zynex's offerings, leadership turnover, gaps in C-suite continuity, and the need to refinance significant convertible debt may distract from effective execution and could add to financial pressure in an already challenging reimbursement and regulatory environment, dampening the outlook for cash flow and earnings recovery.

Zynex Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Zynex compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Zynex's revenue will decrease by 8.4% annually over the next 3 years.
• The bearish analysts are not forecasting that Zynex will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Zynex's profit margin will increase from -19.8% to the average US Medical Equipment industry of 12.3% in 3 years.
• If Zynex's profit margin were to converge on the industry average, you could expect earnings to reach $13.7 million (and earnings per share of $0.53) by about August 2028, up from $-28.7 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 5.2x on those 2028 earnings, up from -1.5x today. This future PE is lower than the current PE for the US Medical Equipment industry at 28.0x.
• Analysts expect the number of shares outstanding to decline by 4.55% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.13%, as per the Simply Wall St company report.

Zynex Future Earnings Per Share Growth

Risks

• The ongoing TRICARE payment suspension continues to create major uncertainty in Zynex's revenue base, with management acknowledging service is still being provided for zero payment at TRICARE's request, which negatively impacts both near-term revenues and cash flow and leaves long-term payer relationships in question.
  
• Zynex's aggressive cost-cutting actions-including a 14% staff reduction in June, closure of 90 corporate roles, and significant salesforce reductions-risk further slowing revenue growth and order generation, especially as sales and marketing workforce has been cut in half, raising doubts about the company's ability to regain its prior revenue run rate.
  
• A significant decline in net revenue from $49.9 million in Q2 2024 to $22.3 million in Q2 2025 indicates sharply reduced demand growth and points to long-term market and execution risks in sustaining or expanding Zynex's market share, impacting earnings growth and future profitability.
  
• The delay in receiving FDA clearance for the NiCO pulse oximeter, along with indications that there could be additional rounds of FDA questions, poses a risk that new product launches may not deliver the anticipated revenue diversification or margin uplift in a timely manner, potentially impeding long-term top-line growth and depressing margins if the pipeline underperforms.
  
• With $60 million in convertible debt coming due in May 2026 now classified as a current liability, limited cash reserves of $17.5 million, and management turnover including CFO resignation and CEO transition, Zynex faces financial and leadership instability, heightening risk to earnings predictability, refinancing efforts, and the company's ability to invest in future growth.

Valuation

• The assumed bearish price target for Zynex is $2.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Zynex'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 $3.7, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $111.2 million, earnings will come to $13.7 million, and it would be trading on a PE ratio of 5.2x, assuming you use a discount rate of 11.1%.
  
• Given the current share price of $1.45, the bearish analyst price target of $2.0 is 27.5% 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.