Sales Force Expansion Will Drive Clinic Onboarding Amid Competitive Concerns

Key Takeaways

• Sales force expansion, tech upgrades, and vertical integration are expected to boost clinic growth, margins, and long-term revenue sustainability.
  
• Growth in dietary supplements and digital channels diversifies earnings and provides greater resilience and recurring profitability.
  
• Intensifying competition, reliance on clinic expansion, and near-term cost pressures threaten revenue growth, pricing power, and margin stability without a turnaround in new clinic and procedure volumes.

Catalysts

Operates in practice-building business within the hormone optimization space.

• The strategic restructuring and 25% expansion of the sales force, along with alignment of compensation plans towards new clinic growth, is expected to accelerate provider network expansion and clinic onboarding, driving an increase in future procedure revenue and top-line growth as Biote captures more of the underpenetrated addressable market fueled by an aging population and greater focus on preventive health.
  
• Full implementation of the upgraded clinical decision support software (CDSS) is anticipated to improve procedural accuracy, provider confidence, and adoption rates over time; this enhances Biote’s clinical value proposition, supports mainstream physician utilization, and should positively impact future revenue growth and patient retention as healthcare shifts toward personalized, outcome-driven care.
  
• Continued strong growth in the higher-margin dietary supplements business, particularly through the e-commerce channel, diversifies revenue streams and provides more recurring earnings stability, which can improve gross margin and net margins as this business segment expands.
  
• Advancing vertical integration through the 503(b) manufacturing facility is yielding cost savings and higher gross profit margins; as integration gains scale through the year and beyond, this can further strengthen margins and operating leverage, supporting improved earnings and free cash flow.
  
• Ongoing investments in data analytics, provider training, and technical support further differentiate Biote’s offerings and support deeper market penetration, leveraging heightened consumer and provider demand for evidence-based, personalized hormone solutions—this should enhance pricing power, boost patient adherence, and ultimately support higher sustainable earnings over the long term.

biote Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming biote's revenue will grow by 10.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 10.6% today to 9.4% in 3 years time.
• Analysts expect earnings to reach $25.0 million (and earnings per share of $0.67) by about May 2028, up from $21.0 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 19.2x on those 2028 earnings, up from 5.9x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 16.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

biote Future Earnings Per Share Growth

Risks

• Ongoing competitive pressures, including increased competition from both existing players and new digital health entrants, have contributed to slower new clinic additions and selective declines in average selling prices; sustained or worsening competition could further compress pricing power and reduce net margins over time.
  
• The recent slowdown in procedure revenue, compounded by softer new clinic volumes and a historical trend of decelerating procedure revenue growth, signals a risk of continued stagnation or contraction in Biote’s core revenue streams if commercial initiatives do not rapidly yield results, impacting both revenue growth and overall earnings.
  
• The company’s heavy reliance on expanding its network of third-party clinics exposes it to operational risks from practitioner churn or underperformance; failure to recruit and retain clinics at a higher rate could add volatility to future revenue recognition.
  
• The strong growth in the dietary supplements business was primarily driven by a better-than-expected e-commerce channel, but as the company laps last year’s solid e-commerce onboarding performance (e.g., Amazon ramp) in the second half of the year, growth rates may decelerate, leading to a potential drag on total top-line growth.
  
• Increased investment in sales, marketing, and realignment expenses (including a 16.4% rise in SG&A) may pressure adjusted EBITDA and margins in the near term, especially if accelerated new clinic and procedure volume growth fails to materialize as anticipated, raising concerns about medium-term profitability.

Valuation

• The analysts have a consensus price target of $6.665 for biote 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 $8.0, and the most bearish reporting a price target of just $4.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $265.7 million, earnings will come to $25.0 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $3.94, the analyst price target of $6.66 is 40.9% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.