Is Masimo Attractive After 20% Share Price Slide and Consumer Health Expansion Scrutiny?

• Many investors are wondering if Masimo at around $135 a share is a bargain in disguise or a value trap. This stock has been on a lot of watchlists lately.
• Despite a strong long term track record in medical technology, the stock is down about 2.9% over the last week, 7.7% over the last month, and roughly 20.5% over the past year. This has reset expectations and risk perceptions for many shareholders.
• Recent headlines have focused on Masimo's ongoing push into non invasive monitoring technologies and hospital automation, alongside scrutiny around its expansion into consumer health devices. These moves have divided opinion on the stock's strategic direction. There has also been attention on management's capital allocation decisions and legal disputes in the consumer space, which help explain why the share price has been so volatile.
• On our framework, Masimo currently scores a 2/6 valuation score, meaning it only screens as undervalued on a couple of checks. Next we will break down what that implies across different valuation methods, before finishing with a more holistic way to think about fair value beyond the usual models.

Masimo scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Masimo Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to the present.

For Masimo, the model starts with last twelve months Free Cash Flow of about $148 million and projects it to grow to roughly $328 million by 2035, based on a mix of analyst estimates for the near term and extrapolated assumptions beyond that. These projected cash flows are then discounted using a required rate of return to reflect risk and the time value of money, resulting in an estimated intrinsic value of about $98.10 per share.

With the stock trading around $135, the DCF output suggests Masimo is roughly 38.4% overvalued under this framework. On these cash flow assumptions, investors are paying a premium well above what the model implies is a reasonable long term value.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Masimo may be overvalued by 38.4%. Discover 908 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Masimo.

Approach 2: Masimo Price vs Sales

For a business like Masimo, which is reinvesting heavily and seeing earnings volatility, the price to sales ratio is a useful way to compare what investors are paying for each dollar of revenue, regardless of current profits. In general, higher expected growth and lower perceived risk can justify a higher sales multiple, while slower growth or greater uncertainty usually call for a lower, more conservative ratio.

Masimo currently trades on a price to sales ratio of about 3.34x, which is almost exactly in line with the broader Medical Equipment industry average of around 3.34x and below the peer group average of roughly 4.43x. Simply Wall St’s proprietary Fair Ratio model, which estimates what Masimo’s price to sales multiple should be given its growth outlook, margins, industry, size and specific risk profile, suggests a fair level closer to 1.44x.

This Fair Ratio is more insightful than a simple peer or industry comparison because it adjusts for Masimo’s own fundamentals rather than assuming every company deserves the same multiple. Compared with the current 3.34x sales multiple, the 1.44x Fair Ratio implies Masimo’s shares are trading at a premium to what its fundamentals support.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1455 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Masimo Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach a clear story about Masimo’s future to the numbers you see, by translating your view of its growth, margins and risks into a financial forecast and then into a fair value estimate you can compare with today’s price. Narratives on Simply Wall St, available to everyone on the Masimo Community page, help you think about your own timing decisions by constantly lining up your Fair Value against the live market price and updating that view automatically as new earnings, news and guidance are released. For example, one Masimo Narrative on the platform currently assumes strong execution on the renewed Philips partnership and long term margin expansion, resulting in a Fair Value near $210. A more cautious Narrative, focused on revenue headwinds and contract risk, lands closer to $170. This illustrates how different but clearly framed perspectives can lead to very different, yet transparent, investment views.

Do you think there's more to the story for Masimo? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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