This report, updated on October 31, 2025, offers a five-dimensional analysis of Surmodics, Inc. (SRDX), examining its Business & Moat, Financials, Past Performance, Future Growth, and Fair Value. We provide critical context by benchmarking SRDX against peers like AngioDynamics, Inc. (ANGO), LeMaitre Vascular, Inc. (LMAT), and Integer Holdings Corporation (ITGR). All insights are framed through the proven investment principles of Warren Buffett and Charlie Munger.
Negative Surmodics operates a stable medical coatings business while betting its future on developing new drug-coated balloons. The company's financial health is poor, marked by declining revenue and consistent unprofitability. Its entire growth story depends on just two key products gaining regulatory approval, which has already faced setbacks. Unlike its larger, more stable competitors, Surmodics has a dangerously narrow product focus. The stock appears significantly overvalued, with a price not justified by its weak financial performance. This is a high-risk, speculative investment; investors should wait for a clear path to profitability.
US: NASDAQ
Surmodics, Inc. operates a hybrid business model within the medical technology space, structured into two distinct segments: Medical Device and In Vitro Diagnostics (IVD). The Medical Device segment is the larger of the two and is itself split into two functions. First, it develops and licenses proprietary surface modification coating technologies to other medical device manufacturers. These coatings make devices like catheters and guidewires more lubricious (slippery) or capable of delivering drugs. Revenue here comes from licensing fees, royalties on the sale of customers' products, and the sale of chemical reagents. Second, this segment also develops and manufactures its own portfolio of medical devices, primarily focused on treating peripheral artery disease (PAD). This includes products like drug-coated balloons and thrombectomy systems, which are sold directly to hospitals. The In Vitro Diagnostics (IVD) segment, while smaller, provides critical chemical components—such as protein stabilizers and substrates—to manufacturers of diagnostic tests and molecular assays. Essentially, Surmodics acts as both a key technology supplier to the industry's biggest players and a direct competitor in a niche device market.
The company's most established and profitable business is its medical device coatings, contributing approximately 33% of total revenue. These proprietary hydrophilic and hemocompatible coatings, like the Serene® and Preside® lines, are applied to devices to improve their passage through arteries and reduce complications. The global medical device coatings market is valued at over $10 billion and is projected to grow at a Compound Annual Growth Rate (CAGR) of around 7%. While competitive, the market for highly specialized, clinically validated coatings is a niche with high barriers to entry. Key competitors include other specialized firms like Biocoat and Harland Medical Systems, but Surmodics' main advantage is its long history and deep integration with major OEMs. Customers are the largest medical device companies in the world, such as Medtronic, Abbott, and Boston Scientific. Stickiness is extremely high; once a Surmodics coating is designed into a customer's device and receives regulatory approval (e.g., from the FDA), switching to another supplier would require a costly and lengthy re-validation and re-submission process. This regulatory lock-in creates a powerful moat, protecting a recurring revenue stream of royalties and reagent sales that is dependent on the success of their customers' products.
Surmodics' second major business line is its proprietary medical devices, which now constitute the largest portion of revenue at roughly 45%. The flagship product is the SurVeil™ drug-coated balloon (DCB) for treating PAD, which was developed to compete with market-leading devices. Other products include the Pounce™ Thrombectomy System for removing blood clots. The market for peripheral vascular devices is substantial, exceeding $5 billion, but is dominated by established giants like Medtronic (IN.PACT Admiral DCB), Boston Scientific (Ranger DCB), and BD (Lutonix DCB). These competitors have immense sales forces, deep-rooted physician relationships, and extensive marketing budgets. Surmodics' primary customers are hospitals and the interventional cardiologists, radiologists, and vascular surgeons who perform these procedures. Customer stickiness in this segment is much lower than in coatings. It is driven by clinical data, physician preference, ease of use, and pricing negotiated through group purchasing organizations (GPOs). Surmodics' moat here is based on intellectual property and product innovation. For instance, the SurVeil™ DCB demonstrated non-inferiority to Medtronic’s market leader in clinical trials, a significant achievement. However, translating this into market share against entrenched competitors is a monumental challenge, making this segment's moat far weaker and more dependent on commercial execution, as evidenced by their strategic partnership with Abbott to handle commercialization.
The In Vitro Diagnostics (IVD) segment contributes the remaining 22% of revenue and operates with a model similar to the coatings business. It supplies critical 'picks and shovels' components, such as protein stabilizers, substrates, and surface coatings, which are essential for the manufacturing of diagnostic immunoassay kits. The total market for immunoassay reagents and kits is vast, exceeding $25 billion. Surmodics operates in a specific, high-value niche within this market. Competitors range from large chemical suppliers like Thermo Fisher and Merck KGaA to other specialty providers. The customers are the world's leading diagnostic companies. Much like the coatings business, the products from this segment are designed into a customer's diagnostic test platform and validated through rigorous regulatory processes. This creates significant switching costs for the customer, as changing a critical component would require extensive testing and potential re-approval of their entire diagnostic assay. This 'spec-in' business model provides a durable competitive advantage and generates a steady, reliable stream of revenue, serving as a stable foundation for the company. The moat for this segment is strong, rooted in its reputation for quality, consistency, and the regulatory burden that prevents customers from easily switching suppliers.
In conclusion, Surmodics presents a business model with a clear dichotomy. Its legacy coatings and IVD segments are classic examples of businesses with a strong and durable moat. They are built on intellectual property, deep customer integration, and, most importantly, high regulatory switching costs. These segments function as a 'toll road,' collecting royalties and sales from the giants of the medical technology industry. They provide stability, high margins, and predictable cash flows, but offer more modest growth prospects that are tied to the broader market.
In stark contrast, the company's strategic pivot into proprietary medical devices represents a higher-risk, higher-reward endeavor. While it opens up a much larger addressable market and the potential for explosive growth, it also pits the small company directly against some of the most powerful and well-funded competitors in healthcare. The moat in this segment is far more tenuous, relying on the differentiation of its technology and successful commercial execution rather than the structural barriers that protect its other businesses. This dual nature makes Surmodics a complex company to analyze. Its long-term resilience depends on the continued strength of its foundational businesses to fund the very challenging and capital-intensive fight for market share in the device space. The business model is resilient at its core, but its overall success is now tied to a much more competitive and uncertain venture.
Surmodics' financial statements reveal a company facing significant operational challenges. Revenue has been on a downward trend, falling -4.91% in the last fiscal year and continuing to decline in the most recent quarters. More concerning is the sharp deterioration in profitability. While the annual gross margin was a healthy 73.8%, it plummeted to just 45.38% in the latest quarter, indicating severe cost pressures or a negative shift in product mix. Consequently, the company remains unprofitable, with a net loss of -$5.32 million and a near-breakeven operating margin of 0.2% in its most recent quarter.
From a balance sheet perspective, the company's position has some strengths but also notable risks. Leverage is low, with a debt-to-equity ratio of 0.29, suggesting debt is not an immediate concern. Liquidity also appears adequate, with a current ratio of 3.91, meaning it has ample short-term assets to cover its short-term liabilities. However, a significant red flag is the high concentration of intangible assets and goodwill, which together make up approximately 40% of total assets. Given the company's poor performance, these assets are at risk of being written down in the future, which would lead to further losses.
The company's ability to generate cash is a mixed signal. For the full fiscal year 2024, Surmodics had a negative free cash flow of -$3.24 million, meaning it spent more cash than it generated. In a slight improvement, the last two quarters have produced small positive free cash flows totaling around $1.5 million. While this recent positive turn is a welcome sign, it is far too small and too recent to offset the broader issues of declining sales and a lack of profitability.
Overall, Surmodics' financial foundation is risky. The manageable debt and recent positive cash flow are minor positives in a story dominated by contracting revenue, evaporating margins, and persistent net losses. Until the company can demonstrate a clear path to sustainable top-line growth and profitability, its financial stability remains in question.
An analysis of Surmodics' performance over the last five fiscal years (FY2020–FY2024) reveals a company with significant operational and financial instability. Revenue growth has been choppy and unpredictable, lacking the steady compounding seen in mature medical device companies. After growing 32.7% in FY2023, revenue declined by 4.9% in FY2024, highlighting a dependency on non-recurring milestones or inconsistent product demand rather than a durable, growing commercial base. This volatility makes it difficult to assess the underlying health and scalability of the business based on its historical top-line performance.
The company's profitability has severely deteriorated over this period. After posting small net incomes in FY2020 (1.12 million) and FY2021 (4.24 million), Surmodics has since reported consecutive and substantial losses. Operating margins have swung wildly, from a positive 4.23% in FY2023 to a deeply negative -22.1% in FY2022, showcasing a lack of cost control and operating leverage. While its gross margins remain a bright spot, suggesting value in its core technology, the high and rising operating expenses have erased any potential for profit, a critical weakness compared to consistently profitable peers like Merit Medical.
From a cash flow and capital allocation perspective, the historical record is also weak. Free cash flow has been unreliable and turned negative in two of the last three fiscal years, including -20.59 million in 2022 and -3.24 million in 2024. This indicates the company is not generating enough cash from its operations to fund itself, a major red flag for investors. Surmodics does not pay a dividend, and while it has engaged in share repurchases, doing so while unprofitable and burning cash is poor capital management. Overall, the company's past performance does not support confidence in its execution or financial resilience.
The future growth of Surmodics is deeply tied to the shifting dynamics within the medical technology industry, specifically in peripheral artery disease (PAD) treatment and in-vitro diagnostics (IVD). Over the next 3-5 years, the demand for minimally invasive PAD treatments is expected to grow steadily, driven by an aging global population and the rising prevalence of diabetes and obesity, key risk factors for vascular disease. The global peripheral vascular device market is projected to grow at a CAGR of 6-8%, reaching over $15 billion by 2028. Key catalysts for this growth include technological advancements leading to safer and more effective devices, increasing physician adoption of new technologies like drug-coated balloons (DCBs), and expanding reimbursement coverage. However, this is a mature and consolidated market. Competitive intensity is extremely high, with a few large players dominating physician relationships and hospital contracts, making it difficult for new entrants to gain significant market share without a disruptive product or a powerful commercial partner.
In the IVD components sub-industry, the outlook is one of stable, consistent growth. The market for immunoassay reagents and components is expected to grow at a CAGR of 5-7%, fueled by the global expansion of healthcare access, a greater emphasis on early disease detection, and the continuous launch of new diagnostic tests. Demand will be driven by higher testing volumes for infectious diseases, oncology, and chronic conditions. Unlike the device market, the competitive landscape for specialized components is less about head-to-head sales battles and more about technical specifications and regulatory lock-in. Once a component is designed into a customer's FDA-approved diagnostic platform, it is very difficult to displace. This creates high barriers to entry and protects incumbent suppliers. The key challenge for Surmodics in this segment is not winning new customers away from rivals, but rather getting designed into the next generation of high-volume diagnostic platforms being developed by major players.
Surmodics' Medical Device Coatings business is a mature and stable segment. Current consumption is driven by royalty payments and reagent sales tied to the unit volumes of its customers' medical devices, which include catheters and guidewires made by MedTech giants. Consumption is currently limited not by demand, but by the product launch cycles of its OEM customers and the overall growth rate of the underlying device markets. Over the next 3-5 years, consumption is expected to increase modestly, in line with the broader medical device market growth of 5-6% annually. The growth will come from existing customers selling more devices and from Surmodics' technology being incorporated into new customer products. The global medical device coatings market is estimated to be over $10 billion. Customers choose suppliers based on coating performance, reliability, and the ability to support them through the regulatory approval process. Surmodics' long history and established relationships give it an edge, but it competes with specialized firms like Biocoat. The primary risk in this segment, though low probability, is a major customer deciding to develop a coating in-house or switch to a competitor for a next-generation device, which could impact a significant royalty stream.
The In-Vitro Diagnostics (IVD) components business operates on a similar model. Current consumption is tied to the manufacturing volumes of its customers, who are the world's leading diagnostic companies. Usage is constrained by the success of these customers' specific diagnostic tests in the market. Looking ahead, consumption is projected to grow steadily as global diagnostic testing volumes increase. This growth will be driven by rising demand for point-of-care testing and companion diagnostics. The market for specialized IVD components is a niche within the massive >$25 billion immunoassay market. Customer choice is dictated by component quality, consistency, and the supplier's regulatory track record, creating very high switching costs. Surmodics outperforms when it can get its components specified into new, high-volume test platforms early in the development cycle. The number of key customers is small and consolidated, and this trend may continue. A medium-probability risk is increased pricing pressure from large customers as they consolidate their supply chains. A 1-2% price concession to a major customer could meaningfully impact the segment's otherwise high margins.
The SurVeil™ drug-coated balloon (DCB) represents the company's single largest growth opportunity. Current consumption is nascent, as the product is in the initial phase of commercial launch in the U.S. through its partner, Abbott. Consumption is currently limited by the time it takes Abbott's sales team to get the product approved by hospital committees and to convince physicians to trial it against entrenched competitors. Over the next 3-5 years, consumption is expected to increase significantly as Abbott leverages its massive sales force. The key catalyst is demonstrating the product's non-inferiority to Medtronic's market-leading IN.PACT Admiral DCB, which generates hundreds of millions in annual sales. The addressable market is the >$1 billion PAD DCB segment. Customers (physicians) choose DCBs based on clinical data, deliverability (ease of use), and existing relationships. Surmodics' success depends entirely on Abbott's ability to execute. The biggest risk, with high probability, is that the commercial ramp is slower than expected, failing to capture meaningful share from Medtronic and Boston Scientific. A failure to achieve at least a 5-10% market share in the first few years would be a significant blow to the company's growth thesis.
Finally, the Pounce™ Thrombectomy System targets the fast-growing market for treating acute limb ischemia. Current consumption is very low as Surmodics is commercializing this with its own small, direct sales force. It is constrained by a lack of scale and brand recognition compared to established players. The key change over the next 3-5 years will be attempting to drive adoption in a niche but growing market. The mechanical thrombectomy market is growing at a CAGR of 15-20%. While Pounce's addressable market is a smaller segment of this, the growth is still substantial. Competition is fierce, with Penumbra and Inari Medical dominating the space with broader product portfolios and larger clinical data sets. Customers choose these devices based on effectiveness, safety, and speed. Pounce's 'clot extraction' mechanism is unique, but its clinical and economic benefits must be clearly proven to win share. The number of companies in this space is increasing, driven by high growth and investor interest. A high-probability risk for Surmodics is that Pounce remains a niche product with low, single-digit market share, unable to compete effectively against the R&D and commercial resources of its larger rivals, thus failing to become a meaningful contributor to revenue growth.
Beyond specific product lines, Surmodics' future growth hinges on its ability to manage its dual identity. The company must continue to generate stable cash flow from its legacy businesses to fund the cash-intensive commercialization and R&D efforts for its proprietary devices. The success of the Abbott partnership for SurVeil is paramount and will serve as a proof point for Surmodics' device development capabilities. A successful launch could attract further partnerships or even make the company an attractive acquisition target for a larger player looking to bolster its vascular portfolio. Conversely, a failure in this partnership would severely damage investor confidence and force the company to re-evaluate its high-growth strategy, potentially returning to its roots as a more stable, lower-growth technology supplier. Investors should closely monitor SurVeil's sales ramp and any announcements regarding the development of next-generation devices in its pipeline, as these are the most critical indicators of the company's long-term growth potential.
As of October 31, 2025, Surmodics, Inc. is facing significant valuation headwinds despite trading near its 52-week low. The company's lack of profitability and volatile cash flow make it difficult to justify its current market price through traditional valuation methods. Several models, including those based on discounted cash flow and earnings, suggest a fair value far below the current price, with some estimates even falling into negative territory due to the company's negative earnings per share (-1.24 TTM). A triangulated valuation approach highlights these concerns: A simple price check against estimated fair value suggests significant downside. Price $26.93 vs. FV (model-derived) $3.42–$8.52 → Downside Potential. This indicates the stock is overvalued with no margin of safety, making it a watchlist candidate at best until fundamentals improve. This method reveals a stark contrast. The P/E ratio is not applicable because of negative earnings. The EV/EBITDA multiple of 55.33 is exceptionally high compared to industry medians, which typically range from 15x to 25x. This implies the market is either expecting a dramatic turnaround in profitability or is significantly mispricing the stock. The EV/Sales multiple of 3.21 is more reasonable but is undermined by recent revenue declines of -2.55% and -12.12% in the last two quarters. A company with shrinking sales does not typically warrant a premium sales multiple. This approach also signals overvaluation. Surmodics does not pay a dividend, and its free cash flow (FCF) generation is inconsistent. While the last two quarters showed slightly positive FCF, the trailing twelve months and the last fiscal year were negative. The resulting FCF yield is negligible or negative (-0.91% Current), indicating the company does not generate enough cash to provide a meaningful return to investors at its current price. In conclusion, while the Price-to-Book ratio of 3.49 might seem fair in isolation, it is overshadowed by weak performance metrics across the board. The most weight should be given to the earnings and cash flow-based methods, which clearly indicate overvaluation. Combining these approaches suggests a fair value range likely below $10 per share, a stark contrast to its current trading price. The stock appears overvalued due to a disconnect between its market price and its struggling operational performance.
Warren Buffett would view Surmodics as a speculative venture, not an investment, as it fundamentally contradicts his core principles. His investment thesis in the medical device sector requires a company with a durable competitive advantage, like a trusted brand or a razor-and-blade model, that produces predictable, growing cash flows—qualities Surmodics currently lacks. The company's unprofitability, negative cash flow, and reliance on the successful launch of just two key products (SurVeil and Sundance) represent a binary outcome that Buffett would find un-investable. Furthermore, its negative return on invested capital and increasing debt to fund these ventures are significant red flags. For retail investors, Buffett's perspective would be that Surmodics is in his 'too hard' pile; it is a bet on future technology and commercial execution rather than an investment in a proven business. If forced to choose from the medical device components industry, Buffett would likely favor companies like LeMaitre Vascular (LMAT), Integer Holdings (ITGR), and Merit Medical (MMSI) for their established profitability, strong balance sheets, and durable moats. For Buffett to reconsider Surmodics, the company would need to achieve sustained profitability for several years, generate consistent free cash flow, and establish a dominant, defensible market position for its products, fundamentally transforming it from a speculative venture into a predictable business.
Charlie Munger would view Surmodics as a highly speculative venture that falls far outside his circle of competence and investment criteria. Munger's philosophy centers on buying wonderful businesses at fair prices, defined by durable competitive advantages, predictable earnings, and a history of profitability. Surmodics, with its cash-burning operations and a future almost entirely dependent on the successful commercialization of just two new drug-coated balloons, represents the antithesis of this approach; its operating margin is negative, while high-quality peers like LeMaitre Vascular boast margins of 15-20%. While its proprietary coating technology represents a potential moat, the company's ability to translate this into a profitable device business against giant, established competitors is a low-probability bet Munger would refuse to make. He would see a company that consumes cash rather than generates it, making it impossible to value with any certainty. For retail investors, Munger's takeaway would be clear: avoid confusing a fascinating technology with a great business, as this is a speculation, not an investment. If forced to choose top-tier companies in this space, Munger would favor businesses like LeMaitre Vascular (LMAT) for its niche dominance and consistent 15-20% operating margins, Integer Holdings (ITGR) for its powerful moat built on scale and high switching costs, and Merit Medical (MMSI) for its diversified, profitable business model. Munger would only reconsider Surmodics if it successfully launched its products and demonstrated several years of consistent profitability and free cash flow generation, proving its business model is durable.
In 2025, Bill Ackman would likely view Surmodics as an investment that falls far outside his core philosophy of owning simple, predictable, cash-generative businesses with dominant market positions. He would be deterred by the company's current lack of profitability, negative free cash flow, and low gross margins of around 25%, which stand in stark contrast to high-quality peers like LeMaitre Vascular. The investment thesis for Surmodics hinges almost entirely on the speculative success of its drug-coated balloon pipeline, a binary outcome that Ackman, who prefers a clear path to value with a margin of safety, would find unpalatable. The company's reliance on external financing and a concentrated, high-risk product pipeline represents the opposite of the durable, moat-protected platforms he typically seeks. For retail investors, the takeaway is that Surmodics is a venture-capital-style bet on technology, not a high-quality value investment. Ackman would suggest investors seeking exposure to this sector focus on established, profitable leaders like LeMaitre Vascular (LMAT), Integer Holdings (ITGR), and Penumbra (PEN), which demonstrate the durable moats, pricing power, and consistent cash generation he prizes. Ackman would only consider Surmodics if its devices gained significant, profitable market share, transforming it from a speculative venture into a predictable cash-flow generator.
Surmodics operates with a unique dual business model that sets it apart from many competitors. On one hand, it has a long-standing, high-margin Medical Device Coatings business that provides essential surface technologies to a wide range of medical device manufacturers. This segment historically provided stable, recurring revenue and cash flow, acting as the company's financial backbone. On the other hand, Surmodics is aggressively pushing into the whole-product solutions space with its own proprietary drug-coated balloons (DCBs) for treating peripheral artery disease (PAD). This strategic pivot aims to capture a much larger portion of the value chain but requires substantial investment in research, clinical trials, and commercialization, fundamentally changing the company's risk and growth profile.
The competitive environment for Surmodics is twofold. In its coatings business, it competes against other specialized coating providers, some of which are private, and the in-house capabilities of large medical device original equipment manufacturers (OEMs). Its moat here is its specialized intellectual property and long-term customer relationships. In the more critical device business, Surmodics faces a much tougher landscape. It goes head-to-head with medical device giants like Medtronic and Boston Scientific, as well as innovative, fast-growing companies such as AngioDynamics and LeMaitre Vascular. Success in this arena depends not just on superior technology, but also on robust clinical data, physician relationships, and a powerful sales and distribution network—areas where Surmodics is still building its capabilities.
This strategic transition has significant financial implications. While the legacy coatings business remains profitable, the heavy spending on the device segment has resulted in overall operating losses and cash burn. Unlike diversified competitors who can fund innovation from multiple profitable product lines, Surmodics has placed a concentrated bet on its DCB technology. The milestone payments and potential royalties from its partnership with Abbott for the SurVeil™ DCB are critical, but commercial success is not guaranteed. Therefore, the company's financial health is more fragile and its stock performance is more volatile compared to peers with more balanced portfolios.
Overall, Surmodics is a company at a crossroads, attempting to evolve from a reliable component supplier into a fully-fledged medical device innovator. This makes it a fundamentally different investment proposition than its more stable peers. Investors are not buying into a steady, profitable enterprise but rather a company with significant potential upside if its technology can disrupt a large and established market. The primary risks are clinical trial outcomes, regulatory hurdles, and the immense challenge of commercial execution against deeply entrenched competitors. Its performance hinges on its ability to successfully navigate these challenges and prove the value of its innovative device platform.
AngioDynamics presents a direct and compelling comparison as a similarly sized competitor focused on innovative, minimally invasive devices for vascular disease and oncology. While Surmodics is banking its future on a narrow pipeline of drug-coated balloons, AngioDynamics possesses a more diversified product portfolio, including its Auryon atherectomy system, NanoKnife irreversible electroporation platform, and various vascular access products. This diversification gives AngioDynamics multiple avenues for growth and makes it less reliant on a single product's success. Surmodics, in contrast, offers a more concentrated, high-potential-return story centered on its proprietary coating and drug-delivery technology platform.
In terms of business moat, AngioDynamics has a slight edge. Both companies rely on regulatory barriers through FDA and other approvals for their devices. However, AngioDynamics has a stronger brand and a more established commercial footprint among physicians, built over years of selling a broader portfolio. Surmodics has a strong reputation in coatings (over 40 years of experience), but its device brand is still nascent. Switching costs are moderate for both, as physicians train on specific devices, but AngioDynamics' wider product range creates stickier relationships. Regarding scale, AngioDynamics is larger, with TTM revenue around ~$340 million versus Surmodics' ~$135 million, providing greater operational leverage. Neither company benefits significantly from network effects. Winner: AngioDynamics, Inc. due to its established commercial infrastructure and more diversified product portfolio.
From a financial standpoint, AngioDynamics is in a stronger position. It has consistently generated higher revenue growth historically, though both companies have faced recent challenges. AngioDynamics maintains a superior gross margin (~54%) compared to Surmodics (~25%), whose margins are diluted by lower-margin device sales and high manufacturing costs. While both companies have reported net losses recently due to investments in growth and commercialization, AngioDynamics has a better track record of profitability. On the balance sheet, AngioDynamics has managed its debt well, with a low net debt/EBITDA ratio, whereas Surmodics has taken on debt to fund its pipeline. AngioDynamics also generates more consistent, though still modest, free cash flow, giving it more operational flexibility. Winner: AngioDynamics, Inc. based on its superior margins and more stable financial footing.
Looking at past performance, neither company has delivered strong shareholder returns recently amidst a challenging med-tech environment. Over the past five years, both stocks have significantly underperformed the broader market. AngioDynamics has shown a more consistent, albeit modest, revenue CAGR (~2-3%) over the past five years, while Surmodics' revenue has been lumpier due to milestone payments. Margin trend analysis shows compression for both companies as they invest heavily in R&D and sales infrastructure. In terms of risk, both stocks exhibit high volatility (beta >1.0), but Surmodics' reliance on fewer products arguably makes it the riskier of the two from a fundamental perspective. Winner: AngioDynamics, Inc. for its slightly more stable, albeit unimpressive, historical operating performance.
For future growth, the comparison is more nuanced. Surmodics' growth is almost entirely tethered to the commercial success of its SurVeil and Sundance DCBs, targeting a large TAM in the peripheral artery disease market. Positive clinical data could lead to explosive growth. AngioDynamics' growth is more spread out across its key platforms like Auryon and NanoKnife. Analyst consensus projects a return to positive growth for both, but Surmodics has a higher ceiling if its products are adopted. AngioDynamics has the edge on execution and an existing sales channel, while Surmodics has the edge on potentially disruptive technology. The risk for Surmodics is binary (adoption vs. failure), while the risk for AngioDynamics is more about managing growth across multiple product lines. Winner: Surmodics, Inc. for its higher potential growth ceiling, albeit with significantly higher risk.
Valuation for both companies is challenging given their lack of profitability. The most relevant metric is Price-to-Sales (P/S) or Enterprise Value-to-Sales (EV/Sales). Surmodics typically trades at a P/S ratio in the ~3.0x - 4.0x range, while AngioDynamics trades at a lower multiple, often ~1.5x - 2.5x. This premium for Surmodics reflects the market's pricing-in of potential blockbuster success for its device pipeline. From a quality vs. price perspective, an investor in AngioDynamics is paying a lower price for a more diversified, albeit slower-growing, business. An investor in Surmodics is paying a premium for a shot at hyper-growth. Given the execution risks, AngioDynamics appears to be the better value today as it offers a more tangible and diversified asset base for its valuation.
Winner: AngioDynamics, Inc. over Surmodics, Inc. AngioDynamics is the stronger company overall due to its diversified portfolio, established commercial presence, and more stable financial profile. Its key strengths are its multiple growth platforms (Auryon, NanoKnife), which reduce reliance on any single product, and its superior gross margins (~54%). Its primary weakness is its recent struggle to translate its product portfolio into consistent profitability. Surmodics' key strength is its potentially best-in-class drug-coated balloon technology, which could fuel massive growth. However, this is offset by its notable weaknesses: product concentration, negative cash flow, and the immense risk associated with commercializing new devices against giant competitors. The verdict favors AngioDynamics' more balanced and de-risked business model.
LeMaitre Vascular is a specialized manufacturer and seller of devices for the treatment of peripheral vascular disease, making it a direct competitor to Surmodics' device ambitions. Unlike Surmodics, which is a newcomer to the device market, LeMaitre has a long and successful history of operating a profitable, niche business model. LeMaitre focuses on acquiring or internally developing a portfolio of well-established, often single-use, vascular surgery products. This contrasts sharply with Surmodics' strategy of leveraging a single core technology platform to launch potentially disruptive but unproven products.
LeMaitre Vascular boasts a much stronger business moat. Its brand is highly respected within the vascular surgeon community, built on a track record of reliability spanning decades. Its moat comes from a 'razor-and-blade' model and a portfolio of 15+ distinct product lines that create high switching costs for surgeons who are accustomed to them. In terms of scale, LeMaitre's revenue (~ $180 million TTM) is larger and more predictable than Surmodics' (~ $135 million). LeMaitre also benefits from regulatory barriers, with a long history of gaining approvals for its niche products. Surmodics' moat is concentrated in its patented technology, which is potent but not yet commercially proven at scale. Winner: LeMaitre Vascular, Inc. for its entrenched market position and diversified, profitable niche strategy.
Financially, LeMaitre is vastly superior to Surmodics. LeMaitre has a long history of consistent revenue growth (~8-10% annually) and, most importantly, is highly profitable. Its operating margin consistently hovers in the 15-20% range, while Surmodics is currently operating at a significant loss. LeMaitre's Return on Equity (ROE) is consistently positive, often in the double digits, showcasing efficient use of capital. The company maintains a pristine balance sheet with minimal to no net debt and generates strong, predictable free cash flow, which it uses for acquisitions and dividends. Surmodics, by contrast, is burning cash to fund its growth initiatives. Winner: LeMaitre Vascular, Inc. by a wide margin due to its consistent profitability and fortress-like balance sheet.
LeMaitre's past performance reflects its steady and successful business model. It has delivered consistent, positive revenue and EPS CAGR over the last five years, a sharp contrast to Surmodics' volatile results. LeMaitre's margin trend has been stable and strong, while Surmodics' has deteriorated with its heavy R&D and commercialization spending. This operational excellence has translated into superior Total Shareholder Return (TSR) over the long term, though it has faced recent headwinds like other med-tech stocks. From a risk perspective, LeMaitre's stock is far less volatile (beta ~0.8), reflecting its predictable business. Surmodics' stock is a classic high-beta, high-risk play. Winner: LeMaitre Vascular, Inc. for its track record of profitable growth and superior shareholder returns.
Looking at future growth, Surmodics has a clear edge in terms of potential magnitude. If its DCBs capture significant market share in the multi-billion dollar PAD market, its revenue could multiply. LeMaitre's growth is more modest and predictable, driven by market expansion, price increases, and tuck-in acquisitions. Its growth drivers are incremental, not explosive. Analyst consensus for LeMaitre is for high-single-digit growth, whereas projections for Surmodics are much higher but carry far more uncertainty. Surmodics has the edge on its large TAM and disruptive potential. LeMaitre has the edge on predictability and a proven ability to execute its growth strategy. Winner: Surmodics, Inc. based solely on its higher, albeit riskier, growth ceiling.
In terms of valuation, LeMaitre trades at a premium reflective of its high quality. Its Price-to-Earnings (P/E) ratio is often in the 30x-40x range, and its EV/EBITDA multiple is also robust. This is the price for a highly profitable, debt-free, growing company. Surmodics cannot be valued on earnings, so its P/S ratio of ~3.0x-4.0x looks cheaper on the surface compared to LeMaitre's ~6.0x-7.0x. However, the quality vs. price comparison is stark. LeMaitre's premium is justified by its profitability, clean balance sheet, and consistent execution. Surmodics' valuation is entirely based on future hope. LeMaitre is the better value for risk-averse investors, while Surmodics only appeals to those with a high tolerance for speculation.
Winner: LeMaitre Vascular, Inc. over Surmodics, Inc. LeMaitre is the clear winner due to its proven, profitable, and durable business model. Its key strengths are its consistent profitability (operating margin ~15-20%), a debt-free balance sheet, and a diversified portfolio of niche vascular products that create a strong moat. Its primary weakness is its inherently slower, more incremental growth profile compared to a venture-stage story. Surmodics' main strength is the massive upside potential of its DCB technology. This is overshadowed by its current unprofitability, cash burn, and the binary risk of its concentrated product pipeline. LeMaitre represents a high-quality compounder, while Surmodics is a speculative venture.
Integer Holdings is a medical device outsourcer (MDO) and serves as an excellent benchmark for Surmodics' components and coatings business, albeit at a much larger scale. Integer provides design, development, and manufacturing services for a vast range of medical devices, from cardio and vascular components to neuromodulation devices. This makes it a critical partner to many of the world's top medical device companies. While Surmodics provides a highly specialized service (coatings), Integer offers a deeply integrated, end-to-end solution, making it a more strategic, albeit less specialized, partner to its customers.
Integer's business moat is built on immense scale and deep integration with its customers. Its brand is synonymous with reliable outsourcing in the med-tech industry. Switching costs are extremely high for its customers, as moving the manufacturing of a complex, FDA-regulated device is a multi-year, high-risk process. Integer's scale is its primary advantage; with TTM revenue exceeding ~$1.6 billion, it dwarfs Surmodics (~ $135 million), allowing for significant purchasing power and manufacturing efficiencies. It also has a wide regulatory footprint, with experience navigating approvals across numerous device classes and geographies. Surmodics' moat is its IP, but it lacks Integer's scale and customer integration. Winner: Integer Holdings Corporation due to its formidable scale and exceptionally high switching costs.
Financially, Integer is a mature, profitable enterprise, standing in stark contrast to Surmodics. Integer consistently generates strong revenue growth, driven by industry outsourcing trends and acquisitions. Its operating margins are stable, typically in the ~12-15% range, reflecting its operational efficiency. The company's ROIC is a key metric, and it consistently delivers solid returns, indicating effective capital allocation. While Integer carries a significant amount of debt (net debt/EBITDA often ~2.5x-3.5x) due to its acquisitive strategy, this is well-managed and supported by strong and predictable free cash flow generation of hundreds of millions annually. Surmodics operates at a loss and burns cash. Winner: Integer Holdings Corporation for its profitability, scale, and robust cash generation.
Integer's past performance demonstrates the power of its business model. Over the past five years, it has delivered steady revenue and EPS growth, complemented by margin expansion as it realizes synergies from acquisitions. This has led to strong TSR, significantly outperforming Surmodics over nearly every long-term period. From a risk perspective, Integer's stock is less volatile (beta ~1.0), and its business risk is mitigated by its diversification across hundreds of products and customers. Surmodics' performance has been erratic, driven by clinical trial news and milestone payments. Winner: Integer Holdings Corporation for its consistent growth, margin expansion, and superior risk-adjusted returns.
Assessing future growth, Integer is positioned to benefit from the powerful tailwind of increased outsourcing in the medical device industry. Its growth drivers include expanding its capabilities in high-growth areas like structural heart and neuromodulation, as well as cross-selling its broad service offerings to existing clients. Its growth is broad-based and highly visible. Surmodics' growth outlook is narrow and binary, dependent on its DCB pipeline. Integer has the edge on predictability and market tailwinds. Surmodics has the edge on the sheer magnitude of potential growth if its bet pays off. For a typical investor, Integer's growth profile is far more attractive. Winner: Integer Holdings Corporation for its durable and diversified growth drivers.
From a valuation perspective, Integer trades at a reasonable multiple for a high-quality industrial-style company. Its forward P/E ratio is typically in the ~18x-25x range, and its EV/EBITDA multiple is around ~12x-15x. This valuation is supported by tangible earnings and cash flow. Surmodics' valuation on a P/S basis of ~3.0x-4.0x is not directly comparable. When considering quality vs. price, Integer offers a proven business model, profitability, and clear growth drivers at a fair price. Surmodics offers a speculative story at a price that assumes a high probability of success. Integer is the better value, offering a much higher degree of certainty for its valuation.
Winner: Integer Holdings Corporation over Surmodics, Inc. Integer is unequivocally the stronger company, representing what a scaled, mature, and profitable medical device components and outsourcing business looks like. Its key strengths are its immense scale, deep customer integration creating high switching costs, and consistent financial performance (operating margin ~12-15%, strong FCF). Its main risk is its debt load, though it is well-managed. Surmodics' only comparable advantage is the explosive potential of its technology. However, this is dwarfed by its weaknesses of being small, unprofitable, and highly concentrated. This comparison highlights the significant operational and financial gap Surmodics must bridge to achieve its goals.
Merit Medical Systems provides a broad range of disposable medical devices used in interventional cardiology and radiology, making it a competitor in the same hospital call points that Surmodics aims to penetrate with its devices. Merit's strategy is to be a one-stop shop for accessory products, offering everything from inflation devices to catheters and guidewires. This is a business built on breadth and commercial execution, contrasting with Surmodics' depth in a specific technological niche.
Merit's business moat is derived from its vast product portfolio and strong commercial relationships. Its brand is well-established with clinicians who rely on its broad catalog. The primary moat is scale and switching costs at a system level; while a hospital could switch a single product, replacing Merit's entire suite of products would be complex and costly. With TTM revenue of ~$1.2 billion, Merit's scale provides significant manufacturing and distribution advantages over Surmodics. Both companies face high regulatory barriers, but Merit has a much longer and more extensive track record of navigating global approvals for its thousands of SKUs. Winner: Merit Medical Systems, Inc. due to its extensive product portfolio, commercial scale, and embedded customer relationships.
Financially, Merit is a robust and growing company. It has a long track record of delivering consistent mid-to-high single-digit revenue growth. Merit is profitable, with operating margins that have been improving and now sit in the ~12-14% range. This profitability allows it to generate significant free cash flow, which it uses to pay down debt and reinvest in the business. In terms of leverage, Merit has worked to reduce its net debt/EBITDA ratio to a manageable level below ~2.0x. Surmodics is not yet profitable and is consuming cash, placing it in a much weaker financial position. Winner: Merit Medical Systems, Inc. for its proven ability to generate profitable growth and strong cash flow.
Merit's past performance has been solid, reflecting its successful execution. It has delivered a consistent revenue CAGR of ~5-7% over the past five years and has shown a positive margin trend through operational improvements. This steady performance has resulted in a much better TSR over the last five years compared to the volatility and underperformance of Surmodics. From a risk perspective, Merit's diverse revenue streams make it fundamentally less risky than Surmodics. Its stock beta is typically around ~1.0, reflecting market-level risk rather than the speculative risk inherent in Surmodics. Winner: Merit Medical Systems, Inc. for its consistent operational execution and superior historical returns.
For future growth, Merit's strategy relies on geographic expansion, new product introductions, and capturing a greater share of its customers' spend. Its growth drivers are incremental but highly reliable, supported by a powerful commercial engine. Analyst consensus calls for continued mid-single-digit revenue growth and margin expansion. Surmodics, again, offers a much higher but more uncertain growth profile. Merit has the edge in predictable execution and a clear path to continued growth. Surmodics has the edge in the potential for a step-change in its revenue trajectory. For most investors, Merit's de-risked growth is more appealing. Winner: Merit Medical Systems, Inc. for its clear and achievable growth pathway.
From a valuation standpoint, Merit trades like a high-quality medical device company, typically at a forward P/E of ~20x-25x and an EV/EBITDA multiple of ~13x-16x. This valuation is underpinned by real earnings and cash flow. Surmodics can only be valued on sales. In a quality vs. price analysis, Merit's valuation is a fair price for a company with a strong competitive position, consistent growth, and improving margins. Surmodics is a bet on a future outcome that is far from certain. Therefore, Merit represents better value on a risk-adjusted basis.
Winner: Merit Medical Systems, Inc. over Surmodics, Inc. Merit is a superior company based on nearly every metric. Its key strengths are its highly diversified product portfolio, a large and effective global sales force, and a track record of consistent, profitable growth (operating margin ~12-14%). Its primary weakness could be seen as a lack of a single 'blockbuster' product, leading to more incremental growth. Surmodics' sole advantage is the theoretical home-run potential of its DCB technology. This is completely overshadowed by its unprofitability, small scale, and the extreme concentration risk of its strategy. Merit is a well-run, durable business, while Surmodics is a high-stakes venture.
Artivion, formerly CryoLife, focuses on developing medical devices and implantable human tissues for treating cardiac and vascular diseases. Its portfolio, including aortic stents, grafts, and tissue preservation services, places it in the specialized cardiovascular market, overlapping with Surmodics' vascular ambitions. Artivion's business model is a unique hybrid of medical devices and biologic products, which provides it with a distinct competitive niche compared to Surmodics' focus on surface technology and drug delivery.
Artivion's business moat is rooted in its specialized products and expertise in human tissue processing. Its brand is strong among cardiac and vascular surgeons who perform complex aortic repairs. The company's key products, like the On-X mechanical heart valve and preserved human tissues, have high switching costs due to surgical training and clinical preference. Its tissue processing capabilities represent a significant regulatory barrier and are difficult to replicate. In terms of scale, Artivion's TTM revenue of ~$350 million is significantly larger than Surmodics'. While Surmodics has a strong moat in its coating IP, Artivion's moat is more diversified across a portfolio of life-saving, specialized products. Winner: Artivion, Inc. for its unique and defensible position in the aortic repair market.
Financially, Artivion is in a more advanced stage than Surmodics. The company generates consistent revenue growth, often in the high-single to low-double digits. While its gross margin (~65-70%) is very strong and superior to Surmodics', its operating margin has been slim or negative at times due to investments in R&D and commercialization for key products like AMDS. However, it is much closer to sustained profitability than Surmodics. Artivion carries a notable amount of debt (net debt/EBITDA > 4.0x), a key risk factor, but has a clear path to growing its EBITDA to improve that ratio. Surmodics is currently unprofitable and burning cash. Winner: Artivion, Inc. due to its higher revenue base, much stronger gross margins, and clearer path to profitability.
Looking at past performance, Artivion has been focused on a strategic transformation, divesting non-core assets and focusing on its high-growth aortic products. This has led to an improving revenue CAGR in its core business. The margin trend for gross profit has been strong, though operating margin has been inconsistent. Over the past five years, its TSR has been volatile but has shown periods of significant strength as its strategy has gained traction. Surmodics' performance has been more consistently negative. From a risk perspective, Artivion's key risk is its balance sheet leverage, while Surmodics' is existential and tied to its pipeline. Winner: Artivion, Inc. for demonstrating successful strategic execution and better long-term growth in its core markets.
In terms of future growth, both companies have compelling drivers. Artivion's growth is centered on driving the adoption of its key aortic products, such as the On-X valve and PerClot. The company has a clear strategy to expand its market share and has provided long-term guidance for sustained double-digit growth. Surmodics' growth is less certain but potentially more explosive. Artivion has the edge on a clear, proven commercial strategy and a diversified set of growth products. Surmodics has the edge on the size of the TAM it is targeting with a single technology platform. Given the execution risks, Artivion's growth story is more credible today. Winner: Artivion, Inc. for its more diversified and tangible growth drivers.
From a valuation perspective, Artivion is typically valued on a P/S or EV/Sales basis due to its inconsistent net income. Its EV/Sales multiple often sits in the ~3.5x-4.5x range, which is comparable to Surmodics. In a quality vs. price analysis, both companies trade at similar sales multiples, but Artivion offers a larger revenue base, world-class gross margins (~67%), and a clearer path to leveraging its fixed costs into profitability. Surmodics' valuation requires a greater leap of faith in its unproven commercial capabilities. Therefore, Artivion appears to be the better value, as an investor is buying into a more established business with tangible assets and a proven growth strategy for a similar multiple.
Winner: Artivion, Inc. over Surmodics, Inc. Artivion stands out as the stronger company, driven by its leadership position in the specialized aortic repair market. Its key strengths include its unique portfolio of tissues and devices, very high gross margins (~67%), and a clear strategy that is delivering double-digit revenue growth. Its primary risk is its significant debt load. Surmodics' key strength is the theoretical upside of its DCB platform. This potential is heavily outweighed by its current unprofitability, negative cash flow, and the binary risk profile of its business. Artivion is a focused growth company executing a clear strategy, whereas Surmodics remains a speculative venture.
Penumbra is a high-growth medical device company focused on developing innovative therapies for neurovascular and peripheral vascular diseases. It competes directly with Surmodics in the peripheral vascular market with its Indigo Aspiration System for removing clots but is much larger and more diversified, with a significant business in stroke intervention. Penumbra's story is one of rapid innovation and market creation, offering a glimpse of what a successful, high-growth device company looks like, and serves as a tough benchmark for Surmodics.
Penumbra's business moat is built on continuous innovation and a strong clinical brand. Its brand is synonymous with cutting-edge therapies for stroke and thrombosis. The moat is protected by a deep patent portfolio and the significant switching costs for physicians who are trained on its complex catheter-based systems. Penumbra's scale is massive compared to Surmodics, with TTM revenue approaching ~$1.1 billion. This scale fuels a powerful R&D and commercial engine that Surmodics lacks. Both face high regulatory barriers, but Penumbra has a proven track record of rapidly developing and commercializing novel devices like its Lightning and RED aspiration systems. Winner: Penumbra, Inc. for its demonstrated innovation engine, scale, and strong market leadership in its core segments.
Financially, Penumbra is in a different league. It has a stellar track record of rapid revenue growth, consistently delivering 20%+ annual growth for years. Unlike Surmodics, Penumbra is profitable, with operating margins typically in the ~5-10% range, even as it invests heavily in R&D. This allows the company to self-fund its growth. Its balance sheet is strong, with a healthy cash position and low net debt. It generates positive free cash flow, providing immense flexibility. Surmodics is unprofitable and reliant on milestone payments and financing to fund its operations. Winner: Penumbra, Inc. by an enormous margin, as it represents a best-in-class financial profile for a high-growth med-tech company.
Penumbra's past performance has been exceptional. Its five-year revenue CAGR is well into the double digits, a feat few med-tech companies can match. Its margin trend has also been positive as the company has scaled. This outstanding operational performance has translated into phenomenal TSR for long-term shareholders, though the stock is highly volatile. Surmodics' performance pales in comparison. From a risk standpoint, Penumbra's stock carries a high beta (>1.2) and valuation risk, but its fundamental business risk is much lower than Surmodics' due to its diversification and market leadership. Winner: Penumbra, Inc. for its world-class historical growth and shareholder value creation.
Looking ahead, Penumbra's future growth is expected to remain strong. Its growth drivers include expanding the market for computer-assisted vacuum thrombectomy with its Indigo Lightning system, entering new markets like cardiovascular, and continuous innovation in its neurovascular franchise. Analyst consensus calls for continued 15-20% revenue growth. Surmodics' growth is entirely dependent on its new product launches. Penumbra has the edge on every front: a proven innovation pipeline, a powerful commercial team, and multiple shots on goal. Winner: Penumbra, Inc. for its robust, diversified, and proven growth prospects.
Valuation is Penumbra's primary point of contention. It trades at a very high premium, with a P/E ratio that can exceed ~80x-100x and a P/S ratio in the ~7x-10x range. This valuation prices in years of continued high growth. Surmodics' P/S of ~3.0x-4.0x looks cheap in comparison. However, the quality vs. price difference is immense. Penumbra is one of the highest-quality growth assets in the medical device industry. While expensive, its premium is for a proven winner. Surmodics' lower valuation reflects its speculative nature. For growth-oriented investors, Penumbra, despite its high price, could be considered better value because it is a proven compounder, whereas Surmodics' value is entirely theoretical.
Winner: Penumbra, Inc. over Surmodics, Inc. Penumbra is the decisive winner, representing a best-in-class innovator and growth company in the vascular space. Its key strengths are its rapid and consistent revenue growth (20%+), a powerful innovation engine that creates new markets, and a strong financial profile with profitability and positive cash flow. Its main weakness is its extremely high valuation, which leaves no room for error. Surmodics cannot compete on any fundamental level; its only appeal is the much lower absolute valuation and the lottery-ticket-like potential of its pipeline. Penumbra provides a clear example of the type of successful company Surmodics aspires to become.
Based on industry classification and performance score:
Surmodics operates a dual business model, with one half possessing a strong competitive moat and the other facing significant challenges. Its legacy business of providing specialized coatings and diagnostic components is protected by high customer switching costs and regulatory hurdles, creating a stable, high-margin revenue stream. However, the company's newer, higher-growth division of proprietary medical devices competes directly with industry giants, making its path to success uncertain. This creates a split personality for the company, balancing a protected, slower-growth base with a riskier, more competitive growth engine. The overall investor takeaway is mixed, as the company's success depends on its ability to leverage its stable foundation to win in a highly competitive device market.
As a smaller company, Surmodics lacks the manufacturing scale and global redundancy of its larger competitors, creating operational risk.
Surmodics operates primarily out of two key manufacturing sites: one in Minnesota for coatings and IVD, and one in Ireland for medical devices. While these facilities are FDA-registered and ISO-certified, the company's manufacturing footprint is significantly smaller and less geographically diversified than the industry giants it competes against, such as Medtronic or Abbott. This lack of scale presents a risk; a significant operational disruption, supply chain issue, or natural disaster at one of its main facilities could severely impact its ability to supply products. It does not have the redundant capacity or dual-sourcing capabilities of its larger peers, leading to a higher concentration risk. While sufficient for its current needs, this limited scale is a competitive disadvantage and a point of vulnerability, warranting a 'Fail' on this factor.
The company's core strength lies in its deep, long-term partnerships with major medical device and diagnostic OEMs, where its technology is 'designed-in,' creating sticky, recurring revenue.
This factor is the cornerstone of Surmodics' moat. For decades, the company has established itself as a critical technology partner for the world's leading medical device and diagnostic companies. Its coatings and IVD components are integrated into customer products during the design phase and validated through regulatory approval, creating extremely high switching costs. In its fiscal year 2023, the top 10 customers accounted for 57% of revenue, indicating the depth of these relationships. The landmark agreement with Abbott to commercialize the SurVeil™ DCB is a prime example of a deep, strategic OEM partnership that provides validation and access to a world-class sales channel. These long-term, contractually-driven relationships provide a stable and predictable revenue base that is difficult for competitors to disrupt, earning a clear 'Pass'.
A strong and essential track record in quality and regulatory compliance is a prerequisite for serving top-tier MedTech customers and for securing approvals for its own devices.
For a company whose business relies on being a critical supplier to major medical device OEMs and manufacturing its own Class III devices, a stellar quality and compliance record is non-negotiable. Surmodics' ability to maintain decades-long relationships with partners who have extremely stringent quality requirements speaks to its robust quality systems. Furthermore, successfully navigating the rigorous FDA Premarket Approval (PMA) process for its SurVeil™ drug-coated balloon—one of the most demanding regulatory pathways—is a significant validation of its compliance capabilities. While all medical device companies face regulatory scrutiny and potential for recalls, Surmodics' entire business model is predicated on being a trusted partner and manufacturer, and its history demonstrates a strong commitment to meeting these high standards. This proven capability is a core strength.
This factor is not directly applicable as Surmodics does not sell capital equipment or analyzers that create a captive, recurring revenue stream from a proprietary installed base.
Surmodics' business model does not fit the traditional 'razor-and-blade' model implied by this factor, where a company places an instrument and drives recurring revenue from proprietary consumables. The IVD segment sells components to other diagnostic manufacturers, rather than placing its own analyzers in labs. Similarly, the Medical Device segment sells single-use products like drug-coated balloons and catheters, which are consumed during a procedure but are not tied to a specific piece of Surmodics capital equipment. While the coatings and IVD businesses do generate recurring revenue, it is tied to the sales of their customers' products, not Surmodics' own installed base. Because the company lacks this type of moat, it fails this specific factor.
The company's proprietary product portfolio is highly concentrated in peripheral artery disease, lacking the broad 'menu' of devices offered by its diversified competitors.
In the segment where Surmodics competes directly with its own products, its portfolio is very narrow. It is focused almost exclusively on the peripheral artery disease (PAD) space with a few key products like the SurVeil™ DCB and the Pounce™ system. This contrasts sharply with competitors like Boston Scientific or Medtronic, which offer a comprehensive 'menu' of solutions for vascular intervention, from guidewires and sheaths to stents and atherectomy devices. This narrow focus concentrates risk, making the company's financial performance highly dependent on the success of just a couple of product lines in a very competitive market. While focus can be a strength, in this context, the lack of a broad product portfolio to leverage with hospital customers is a significant weakness compared to the one-stop-shop advantage of its rivals.
Surmodics' current financial health is weak, marked by declining revenue, consistent unprofitability, and collapsing margins. While the company maintains low debt and has generated small positive cash flows in the last two quarters, these points are overshadowed by fundamental issues. Key figures like the latest quarterly revenue of $29.57 million (down -2.55% year-over-year) and a net loss of -$5.32 million highlight the ongoing struggles. The investor takeaway is negative, as the company's financial foundation appears unstable and at risk.
The company's revenue is consistently declining, signaling fundamental weakness in its end markets or competitive position.
Surmodics' top-line performance is a primary concern. Revenue fell by -4.91% in the last full fiscal year. This negative trend has not reversed, with year-over-year revenue declining by -12.12% in Q2 2025 and -2.55% in Q3 2025. While specific data on revenue mix by segment (consumables, services) is not provided, the overall trajectory is clearly negative and weak compared to peers in the medical device industry, which typically see stable to growing demand.
Sustained revenue decline is one of the most significant red flags for an investor. It suggests that the company is losing market share, facing intense pricing pressure, or its products are becoming less relevant. Without a return to growth, it is extremely difficult for a company to achieve profitability and create long-term value for shareholders.
Gross margins have collapsed from strong annual levels to weak quarterly results, signaling a severe and negative change in the company's cost structure or pricing power.
For fiscal year 2024, Surmodics reported a very strong gross margin of 73.8%, which is considered well above the industry average. However, this has deteriorated dramatically in the most recent periods. In Q2 2025, the gross margin fell to 42.33%, and it only recovered slightly to 45.38% in Q3 2025. This latest figure is significantly below the typical benchmark for medical components firms (often 50-70%), classifying it as Weak.
This steep decline of nearly 30 percentage points from the annual high is a major red flag. It suggests that the cost of revenue has ballooned relative to sales, or the company has been forced to lower prices or sell a less profitable mix of products. Without a clear explanation and path to recovery, this erosion of core profitability severely weakens the investment case.
The company is unprofitable at the operating level, with extremely high expenses relative to its revenue, indicating a lack of cost discipline and negative operating leverage.
Surmodics demonstrates poor control over its operating expenses. The company is not profitable, with an operating margin of just 0.2% in the latest quarter and _5.38% in the quarter prior. For the full fiscal year, the operating margin was also negative at _1.54%. These figures are substantially below the 15-25% operating margins seen in healthy medical device companies.
The primary issue is that operating expenses are too high for the current revenue base. In the latest quarter, selling, general, and administrative (SG&A) costs alone were $12.45 million on revenue of $29.57 million, which means SG&A consumed over 42% of all revenue. As revenue declines, these costs are not decreasing proportionally, leading to persistent losses and showing that the company has no operating leverage to turn sales into profit.
The company generates negative returns for its shareholders and has a large amount of intangible assets on its balance sheet that are at risk of being written down.
Surmodics' returns metrics are very poor, reflecting its lack of profitability. Its latest Return on Equity (ROE) was -19.2%, and its annual ROE was -9.67%. This means the company is destroying shareholder value rather than creating it. Similarly, Return on Invested Capital (ROIC) was just 0.1% in the latest measurement period, far below the double-digit returns expected from a strong business. These returns are significantly weaker than industry benchmarks.
A further risk lies on the balance sheet. Goodwill and other intangible assets amount to $67.94 million ($46.32 million + $21.62 million), which represents a substantial 40% of the company's total assets. Given the company's ongoing losses and poor performance, these assets are not generating adequate returns and face a high risk of impairment, which would result in a large, non-cash expense that would further reduce reported earnings and book value.
The company struggles to generate cash, with negative free cash flow annually, although it has managed to produce small positive amounts in the last two quarters.
Surmodics' ability to convert its operations into cash is poor. In its last full fiscal year (FY 2024), the company reported negative free cash flow (FCF) of -$3.24 million, stemming from a very low operating cash flow of only $0.25 million. This indicates the core business did not generate enough cash to fund its investments. There has been a modest improvement recently, with positive FCF of $0.9 million in Q3 2025 and $0.63 million in Q2 2025. However, the FCF margin in the latest quarter was a razor-thin 3.06%.
Working capital management also shows signs of weakness. The annual inventory turnover ratio was 2.2, which is quite slow for a company in the diagnostics and consumables space, suggesting potential inefficiencies or slowing demand. While recent positive cash flow is a step in the right direction, the weak annual performance and low conversion efficiency make this a significant area of concern.
Surmodics' past performance has been highly volatile and inconsistent, marked by erratic revenue and a shift from small profits to significant losses. While the company maintains high gross margins, often above 75%, it has failed to translate this into profitability, reporting a net loss of -11.54 million and negative free cash flow of -3.24 million in fiscal 2024. This track record stands in stark contrast to financially stable and profitable competitors like LeMaitre Vascular and Integer Holdings. The historical data shows a high-risk company struggling with execution, making the investor takeaway on its past performance decidedly negative.
While specific launch metrics are not provided, the company's poor financial results indicate that past product commercialization efforts have not yet led to a profitable or scalable business.
The provided financial data does not include specific metrics on FDA approvals or the revenue contribution from new products. However, we can infer the success of past launches by their financial impact. Over the last five years, despite any launches that may have occurred, Surmodics has not achieved sustained revenue growth or profitability. The persistent net losses and negative free cash flow suggest that commercial execution has been challenging or that the costs of bringing products to market have far outweighed the revenue they generate.
Competitor analysis highlights that Surmodics' future is heavily reliant on a narrow pipeline. Its historical financial performance indicates it has not yet built a successful commercial engine capable of turning its technology into a self-sustaining business. This stands in contrast to companies like Penumbra, which have a proven history of launching innovative products that drive rapid, profitable growth. Based on the financial outcomes, the company's historical launch execution has failed to create shareholder value.
Revenue growth has been erratic and unreliable, with a modest compound growth rate of `7.4%` over the last five years undermined by significant year-over-year volatility.
Surmodics' revenue history lacks the consistent, compounding growth investors seek. While the topline grew from 94.86 million in FY2020 to 126.08 million in FY2024, the path was extremely choppy. For instance, revenue grew 32.7% in FY2023 only to decline by 4.9% the following year. This pattern suggests that revenue is highly dependent on unpredictable factors like milestone payments from partners rather than a steadily growing base of product sales.
This lack of predictability is a major weakness compared to competitors. For example, Merit Medical and LeMaitre Vascular have demonstrated much more consistent mid-to-high single-digit revenue growth over time. Surmodics' erratic performance makes it difficult for investors to have confidence in its ability to scale its business and indicates a history of unreliable commercial execution.
The stock has a history of high volatility and has underperformed its more stable peers, reflecting market concern over its inconsistent financial results and speculative nature.
Surmodics' stock exhibits high risk, as shown by its beta of 1.31, which indicates it is more volatile than the overall market. This volatility is a direct reflection of its underlying business performance, which is characterized by unpredictable revenue, significant losses, and cash burn. The market has not rewarded the company for its historical performance, and as noted in competitor comparisons, its total shareholder return (TSR) has lagged behind stronger peers like Integer Holdings and Merit Medical.
The wide 52-week price range of 26 to 40.39 further illustrates the stock's instability. A history of high volatility combined with poor fundamental performance and underperformance relative to its industry is a negative combination for long-term investors. It signals that the market views the stock as a speculative bet rather than a stable investment.
Earnings and margins have been extremely volatile and have trended negatively over the past five years, with consistent net losses since FY2022 reflecting an inability to control operating costs.
Surmodics' earnings history shows a clear negative trend. After reporting a positive EPS of 0.31 in FY2021, the company's performance collapsed, with EPS hitting -1.96 in FY2022 and -0.82 in FY2024. This decline is driven by a failure to translate high gross margins into operating profit. For example, in FY2024, a strong gross margin of 73.8% was completely erased by operating expenses, resulting in a negative operating margin of -1.54% and a net loss of _11.54 million.
The trend is one of deterioration, not improvement. The wild swings in operating margin, from a positive 4.23% in FY2023 to a negative -22.1% in FY2022, signal a lack of predictability and control over the business. This performance is significantly worse than peers like LeMaitre Vascular, which consistently posts operating margins in the 15-20% range. The inability to generate consistent earnings is a major historical failure.
The company has failed to generate consistent positive free cash flow, offers no dividend, and its capital allocation has been questionable.
Surmodics' historical record of cash generation is poor. Over the last three fiscal years, free cash flow (FCF) has been negative twice, with a burn of -20.59 million in FY2022 and -3.24 million in FY2024. This means the company's core business operations are not generating enough cash to cover its investments, forcing it to rely on its balance sheet or external financing. For a company in the medical device sector, a lack of self-sustaining cash flow is a significant weakness.
Surmodics does not pay a dividend, so there is no direct cash return to shareholders. Furthermore, the company has been repurchasing shares (-1.54 million in FY2024) while being unprofitable and burning cash. This is generally considered poor capital allocation, as the funds could be better used to support operations or strengthen the balance sheet. This contrasts sharply with profitable peers that generate ample FCF to fund growth and return capital to shareholders.
Surmodics' future growth outlook is highly polarized, creating a mixed picture for investors. The company's legacy coatings and diagnostics businesses provide a stable, profitable foundation but offer only modest, market-rate growth. The real potential for significant expansion lies entirely within its new proprietary medical device segment, particularly the SurVeil™ drug-coated balloon and Pounce™ thrombectomy system. However, this segment faces intense competition from industry giants like Medtronic and Boston Scientific. Ultimately, Surmodics' future is a high-risk, high-reward bet on its ability to successfully commercialize these new devices, with the Abbott partnership for SurVeil being the single most critical factor. The investor takeaway is mixed, as the company's growth trajectory is heavily dependent on execution in a market where it is a much smaller player.
With net debt on its balance sheet and cash being allocated to support its own product launches, Surmodics has very limited financial capacity for meaningful acquisitions.
Surmodics' ability to pursue growth through mergers and acquisitions is severely constrained by its balance sheet. As of early 2024, the company held approximately $23.5 million in cash and equivalents against roughly $27.5 million in debt, resulting in a net debt position. This leverage, combined with ongoing cash burn to support the commercialization of its proprietary devices, leaves little to no room for bolt-on deals. Unlike larger competitors who can use strong cash flows or debt capacity to acquire new technologies or market access, Surmodics must focus its limited resources on organic growth. This lack of M&A optionality is a strategic disadvantage in a competitive industry where acquiring assets is a common growth lever.
The recent PMA approval for the SurVeil™ drug-coated balloon was a major pipeline catalyst, and future growth now depends on executing the commercial launch and advancing the next wave of device innovations.
A strong pipeline and successful regulatory navigation are critical for any growth-oriented MedTech company, and Surmodics has recently delivered on a key milestone. The FDA's Premarket Approval (PMA) for SurVeil™ in 2023 was the most significant catalyst for the company in years, unlocking its major growth opportunity. This approval validates the company's R&D and clinical capabilities. While the near-term calendar is now more focused on commercialization, the company's pipeline includes next-generation thrombectomy and other vascular intervention devices. The company's guided revenue growth, which is expected to accelerate post-launch, is entirely dependent on this pipeline turning into commercial products. Because the primary value-driving event (SurVeil approval) has been achieved and is now fueling the growth story, this factor is a clear strength.
The company's manufacturing capacity appears sufficient for current and near-term needs, but there are no significant expansion plans announced, as the focus is on commercialization rather than capital-intensive construction.
Surmodics operates its primary manufacturing facilities in Minnesota and Ireland, which currently support its coatings, IVD, and medical device production. While these facilities are FDA-approved and scalable to a degree, the company's capital expenditures as a percentage of sales are modest, averaging around 4-5%. This level of spending is primarily for maintenance and minor equipment upgrades, not major capacity expansions. The company's strategic priority is driving revenue growth from its newly launched products, not investing heavily in new plants. While current capacity is adequate, this lack of proactive expansion could become a bottleneck if demand for products like SurVeil were to ramp up significantly faster than expected. For now, it represents a neutral-to-negative factor, as growth is not being driven by new capacity.
The company's future growth is almost entirely dependent on the successful launch of its new, narrow product menu, with the Abbott partnership for SurVeil representing the single most critical 'customer win'.
Surmodics' growth thesis hinges on expanding its menu with its own proprietary devices and securing key customer wins for them. The recent FDA approval and subsequent commercial launch of the SurVeil™ DCB via its partnership with Abbott is a monumental customer win that provides access to a world-class sales channel. This is the primary growth driver. Additionally, the company is expanding its 'menu' with the Pounce™ Thrombectomy System and other pipeline products. While the product portfolio remains very narrow compared to diversified competitors, these new additions are a clear pivot towards higher growth. The success of these launches is uncertain, but the strategic steps to expand the menu and secure a major commercial partner are in place, justifying a 'Pass' for this factor as it represents the core of the growth strategy.
Surmodics' business model of selling components and single-use medical devices does not include any digital services, software, or automation, offering no potential for high-margin recurring revenue from this area.
This factor is not applicable to Surmodics' current business strategy. The company sells physical products: chemical coatings, diagnostic components, and disposable medical devices like balloons and catheters. There is no associated software, data analytics platform, or IoT connectivity that could provide a recurring digital service revenue stream. Unlike companies that sell capital equipment with service contracts or software upgrades, Surmodics' revenue is tied directly to product unit sales. While innovation is core to its R&D, it is focused on material science and device engineering, not digital services. Therefore, the company has no growth lever in this category.
Based on an analysis of its financial fundamentals as of October 31, 2025, Surmodics, Inc. (SRDX) appears significantly overvalued. With a closing price of $26.93, the company is trading near its 52-week low, which reflects its ongoing operational challenges, including negative profitability and declining revenue. Key valuation metrics that stand out are its negative Price-to-Earnings (P/E) ratio due to a net loss of $-17.63M (TTM), and a very high Enterprise Value-to-EBITDA (EV/EBITDA) ratio of 55.33 (Current), which is substantially above the medical device industry median of ~20x. While its Enterprise Value-to-Sales (EV/Sales) ratio of 3.21 (Current) is more moderate, the company's recent quarterly revenue declines make this metric less compelling. For investors, the takeaway is negative; the current stock price does not seem justified by the company's recent performance or its fundamental valuation.
The EV/EBITDA multiple is excessively high compared to industry peers, and the EV/Sales multiple is not supported by the company's declining revenue.
The Enterprise Value to EBITDA (EV/EBITDA) ratio is 55.33, which is more than double the median multiple for the medical devices industry (~20x). This indicates the stock is extremely expensive relative to its earnings before interest, taxes, depreciation, and amortization. While the Enterprise Value to Sales (EV/Sales) ratio of 3.21 appears more reasonable, it is not justified given that revenue has been shrinking in recent quarters. A company with negative growth should trade at a discount, not in line with or at a premium to its growing peers.
The company fails to consistently generate positive free cash flow, resulting in a negligible or negative yield for investors at the current valuation.
Free cash flow (FCF) is a critical measure of a company's financial health, representing the cash available after funding operations and capital expenditures. Surmodics' FCF has been volatile, with a negative figure of $-3.24M in the last fiscal year and a negative fcfYield of -0.91% in the current period. While the two most recent quarters have shown small positive FCF, this has not been enough to establish a reliable trend. This poor cash generation ability means the company is not creating value for shareholders from its operations.
Although valuation multiples have decreased from previous highs, they remain significantly elevated compared to sector benchmarks, especially when factoring in poor fundamental performance.
Comparing current valuation to historical levels shows that SRDX has become cheaper; the EV/EBITDA ratio has fallen from 81.28 in fiscal 2024 to 55.33 today. However, this is more a reflection of a falling stock price due to poor performance than an indication of value. In the context of the broader medical devices sector, Surmodics' EV/EBITDA of over 55x is an outlier compared to a median of around 20x. The stock's price is near its 52-week low precisely because its fundamentals do not support its prior valuation, and even at this level, it appears expensive relative to the sector.
With negative trailing and forward earnings, traditional P/E multiples are meaningless and signal a lack of profitability that cannot support the current stock price.
Surmodics is not currently profitable, with a trailing twelve-month EPS of $-1.24. As a result, its P/E ratio is 0, and its forward P/E is also 0. An investment at this level cannot be justified based on current earnings. While analysts forecast future earnings growth, the present lack of profitability makes any valuation based on earnings multiples highly speculative and unfavorable. The absence of positive earnings is a fundamental weakness in the valuation case.
The company maintains strong liquidity ratios and a manageable debt load, providing a stable financial foundation despite operational losses.
Surmodics exhibits a healthy balance sheet. Its current ratio of 3.91 and quick ratio of 2.88 are both robust, indicating it has more than enough short-term assets to cover its short-term liabilities. Total debt of 32.58M is low relative to its market capitalization of 388.47M, and its net cash position is roughly neutral at 0.15M. This financial stability is a key strength, allowing the company to navigate periods of unprofitability without immediate liquidity crises.
A primary risk for Surmodics is its significant concentration on a single product's success. The recent FDA approval for its SurVeil™ drug-coated balloon for treating peripheral artery disease is a major achievement, but it also pivots the company's future almost entirely on this one product's commercial performance. Surmodics is relying on its partner, Abbott, to handle the commercialization, placing a critical part of its future in another company's hands. A slow market uptake, challenges in gaining physician adoption, or unfavorable reimbursement rates could severely undermine Surmodics' revenue growth projections and its ability to recoup years of research and development investment.
The competitive landscape in the medical device industry presents a formidable challenge. Surmodics is competing against giants like Medtronic and Boston Scientific, which have substantially greater financial resources, established global sales forces, and long-standing relationships with hospitals and clinicians. These incumbents can leverage their scale to offer bundled products and aggressive pricing, making it difficult for a smaller player like Surmodics to gain significant market share. Moreover, the industry is subject to rapid technological change. A new, more effective treatment modality for peripheral artery disease could emerge, potentially making drug-coated balloons a less attractive option and disrupting Surmodics' core growth strategy.
From a financial and regulatory standpoint, Surmodics faces ongoing pressures. The company has a history of operating losses due to heavy investment in R&D and lengthy, expensive clinical trials required for FDA approval. This high cash burn rate is a vulnerability; if SurVeil's revenue does not ramp up as expected, the company may face challenges in funding its future product pipeline. On a broader scale, healthcare systems globally are focused on cost containment, which translates into pricing pressure on medical devices. This macroeconomic trend could limit the profitability of SurVeil™ and other future products, making it harder for Surmodics to achieve the financial returns necessary to justify its high-risk, high-reward business model.
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