Initiated 2026-09-21 · Price $86.42 (as of 2026-09-18, stockanalysis.com quote) · Mkt cap $3.00bn · Health care / medical devices · Model: verified

Rating: Hold — Conviction: Low

The modeled cases straddle the price rather than sitting below it: bear $23, base $65, bull $116 against $86.42. That spread is the call. TransMedics has a real regulatory moat in multi-organ warm perfusion and raised FY2026 guidance, but growth has decelerated every year (+209%, +159%, +83%, +37%, now +22–25%) while operating margin fell from 17.9% in FY2025 to 12.5% in Q2 2026 and free cash flow went to roughly zero on the aviation build. Two observable things decide it within two quarters — whether growth stabilizes in the high teens, and whether FY2026 is the margin trough — and I have no edge on either yet. Where every case sits below the price I rate Sell; where they straddle it, Hold.

Model value range vs price
Bear $22.97Base $64.78Bull $116.06Price $86.42

Business overview

TransMedics sells the Organ Care System, which keeps donor hearts, lungs and livers warm and perfused in transit instead of on ice — and unusually, it also owns the logistics. Q2 2026 revenue of $189.9mm split $111.2mm product (+16%) and $78.8mm service (+29%), the service line being the National OCS Program: TransMedics flies the organ, retrieves it, and bills the whole chain. That runs through 22 owned aircraft covering 82% of missions, extended into Europe by the 2026-07-01 acquisition of German operator PAD Aviation. Earnings turn on programme adoption (clinical, not discretionary), product/service mix, and how much of the network's cost the company absorbs before it scales.

Bull case

  1. Guidance went up, not down — FY2026 raised to $737–757mm, +22–25%, excluding PAD Aviation revenue entirely and assuming nothing from the ENHANCE Part B and DENOVO trials. Plays out if liver depth holds while heart and lung stabilize. Model: rev_growth
  2. Two unpriced legs: kidney and Europe — the kidney push was the focus of recent conference commentary and the European network is being built now; neither is in guidance. The moat behind them is real: neither OrganOx nor XVIVO holds FDA approval for a multi-organ platform. Model: rev_growth
  3. The margin trough is self-inflicted and ends — owning aircraft costs more up front and less afterwards, and at 82% mission coverage the build is mostly done. Plays out if FY2026's 12.5–14% adjusted operating margin is the floor. Model: ebitda_margin

Bear case

  1. Deceleration has been uninterrupted — +209%, +159%, +83%, +37%, now +22–25%. Nothing in that sequence has found a floor yet. Model: rev_growth
  2. Competition sits where growth has to come from — OrganOx and XVIVO are taking heart and lung share, and normothermic regional perfusion is a cheap substitute needing no OCS at all. Liver, the strength, is also the most penetrated. Model: rev_growth
  3. Margins are compressing now, not in a scenario — gross margin 58.2% against 61.5% a year earlier, Q2 GAAP operating margin 12.5% against 17.9% for FY2025, and the FY2026 adjusted operating-margin outlook cut to 12.5–14% from about 16%. PAD Aviation dilutes further at first. Model: ebitda_margin
  4. Capital intensity, leverage and duration at once — H1 2026 capex was $43.7mm (12.0% of revenue) against free cash flow of about −$1.9mm, on top of $454.3mm of 2028 convertibles and ~$353mm of aircraft finance leases. Beta 1.88 with the 10Y at 5.00% means a 13.0% discount rate on cash flows that are almost entirely terminal. Model: capex_pct_rev, wacc, exit_ev_ebitda

Valuation & balance sheet

Metric (definition) Current Own history (range or 5y avg) Peers Source, as-of
Forward P/E (consensus EPS, NTM) 46.8x n/a (unverified) Penumbra ~59.1x fwd · XVIVO ~51.1x trailing stockanalysis statistics / peer pages, 2026-09-21
EV/EBITDA (TTM, EV $3.39bn) 29.3x n/a (unverified) Penumbra ~59.2x stockanalysis statistics / peer pages, 2026-09-21
EV/Sales (TTM revenue $668.5mm) 5.07x n/a (unverified) Penumbra ~8.61x stockanalysis statistics / peer pages, 2026-09-21
EBITDA margin (GAAP op. income + D&A / revenue) 22.4% FY2025 −124% (FY2021) to +22.4% (FY2025); first positive year FY2024 n/a (unverified) SEC EDGAR XBRL, 2026-09-21
FCF yield (TTM FCF $79.0mm / mkt cap) 2.6% H1 2026 FCF ≈ −$1.9mm n/a (unverified) stockanalysis statistics / 10-Q, 2026-09-21

Model-implied value range (from model-summary.json; generic module, DCF-Gordon and DCF-exit-multiple, midpoints): Bear $22.97 · Base $64.78 · Bull $116.06 per share, i.e. implied returns of −73.4% / −25.0% / +34.3% vs $86.42. These ranges show how the bull and bear drivers translate into value; they are not price targets. The price sits in the optimistic half of the distribution but inside it, and the base case being 25% low is within what the exit multiple alone can move: the bull case's 21x exit on the base operating path lifts the base midpoint to roughly $76.

The 21.5x trailing P/E on screens is meaningless: FY2025 net income of $190.3mm included the release of a $103.3mm US deferred-tax valuation allowance in Q4 2025. The 46.8x forward multiple is the honest one; this model taxes at the 21.1% rate actually paid in H1 2026.

Balance sheet: net leverage 0.30x FY0 EBITDA against gross 3.79x, and that gap is the point — $867mm of gross debt against $472.7mm of cash. The ladder is lumpy: $20mm in 2027, then $454.3mm of 1.50% convertibles in 2028, $39.7mm in 2029, ~$353mm of aircraft finance leases beyond 2030. Refinancing those converts into a 5% risk-free world is a real event, and it is why S3 and S7a weigh more here than for a debt-free peer. No agency rating retrieved this session.

Model note: built and LibreOffice-verified (3,188 cells matched, 0 failing error checks). One warning check fails: market.diluted_shares (35.9mm) is derived from Q2 net income over diluted EPS rather than a filed count, because the release's 40.7mm "fully diluted" figure includes the 2028 converts' shares, which this model treats as debt. No assumptions lack a basis; no scenario CHECKs remain. Three further judgments: the term loan's and finance leases' rates and maturities were not disclosed in the excerpt retrieved, so their ~7–7.5% coupons and ladder placements are estimates; the converts' conversion price was not retrieved, so in-the-money conversion would dilute more than the modeled +1.5% a year; and finance-leased aircraft never pass through capex, so that driver understates the real asset build. Generator note (2026-09-24): in this module share_change, capital_return_pct and cost_of_debt move EPS and the net-cash path only, and peer_pe feeds a cross-check only; none changes the value range, so bull/bear tags no longer cite them. Scenario deltas were rebuilt after multiple_pct shocks were extended to the Gordon method (previously they moved only the exit-multiple half), and EPS now uses average diluted shares.

Scenario stress test

Reasoned from the bull/bear drivers above. The model column comes from the scenario overlays (Base case + shock).

Scenario Effect Mechanism Magnitude Model Δ value vs Base ($/sh)
S1 Fast equity crash − Beta 1.88, small cap, thin forward GAAP earnings: the kind of name that gaps down in a de-risking High −$18.08
S2 Slow bear / recession − Transplants are clinical, not discretionary, but hospital budgets and staffing slow programme expansion High −$16.03
S3 Rapid rate shock − Worst case for the name: almost all value is terminal and the 2028 converts must be refinanced higher High −$17.73
S4 Slow rate grind − Same channel, slower, across the horizon Med −$10.31
S5 Soft-landing cuts + Long-duration growth with a refinancing need ahead: falling rates help twice Med +$13.63
S6 Recession-driven cuts − Hospital budget pressure outweighs cheaper money, but the rate relief cushions it Med −$4.83
S7a Credit liquidity shock − A borrower with a 2028 convertible maturity and aircraft leases is genuinely exposed when credit windows shut Med −$8.49
S7b Slow default cycle − Refinancing cost plus slower programme adds at financially stressed hospital systems Low −$2.32
S8 Stagflation − Jet fuel, aviation labour and clinical staffing inflate faster than reimbursement-linked pricing can follow High −$15.65
S9a Dollar spike − Mostly US today, but the European network and PAD Aviation put euro revenue and costs on the books Low −$1.03
S9b Dollar slide + Small translation tailwind on the emerging European operation Low +$1.04
S10 Melt-up + High-beta growth medtech is what a melt-up re-rates; the peer cohort already trades at 50–60x High +$20.04
S11 Energy supply shock − Direct and unusual: a captive fleet flying 82% of missions makes jet fuel a real input cost Med −$3.12
S12 Mega-cap/AI derating − Not an AI name, but small-cap high-multiple growth de-rates alongside the leadership it is funded by Med −$8.60

Magnitude labels re-ranked 2026-09-25 to match the model's dollar deltas (skill 3a-v-b item 7; the 2026-09-24 generator fix enlarged multiple-shock rows): S6 Low→Med, S2 Med→High.

Currently active/on watch per the playbook: S3 partially active (10Y 5.00%, price leg met, pace legs short) — the worst row here; S8, S10 and S11 on watch, with S8 and S11 reaching this name through jet fuel more directly than most, and S11 escalated after the 2026-09-19/20 Houthi strikes on Riyadh and Yanbu.

Model value change vs Base, by scenario
S1 Fast equity crash−$18.08S3 Rapid rate shock−$17.73S2 Slow bear / recession−$16.03S8 Stagflation−$15.65S4 Slow rate grind−$10.31S12 Mega-cap/AI derating−$8.60S7a Credit liquidity shock−$8.49S6 Recession-driven cuts−$4.83S11 Energy supply shock−$3.12S7b Slow default cycle−$2.32S9a Dollar spike−$1.03S9b Dollar slide+$1.04S5 Soft-landing cuts+$13.63S10 Melt-up+$20.04

What would change the call

Upgrades to Buy if: FY2027 guidance holds growth at or above 18% while margin recovers off the FY2026 floor — the bull operating path, which puts the range above the price; or the price falls toward the base case near $65 with the story merely stable. Downgrades to Sell if: FY2027 growth guides below the mid-teens, the margin trough extends into 2027 on PAD dilution, or heart and lung visibly cede share to OrganOx, XVIVO or NRP — any of which drags the base toward the bear path.

Watch items

Sources