Electromed stock is a buy, this analyst says

Roth Capital Markets has initiated coverage of Electromed (Electromed Stock Quote, Chart, News, Analysts, Financials NYSE:ELMD) with a “Buy” rating and a 12-month price target of $29, citing strong revenue growth and operating leverage potential.

In a July 21 report, analyst Kyle Bauser said Electromed is well-positioned to sustain double-digit growth. Based in Minnesota, the company develops and markets noninvasive airway clearance devices for patients with impaired lung function. Shares closed at $18.12 on July 21.

“The company is taking share by offering a better technology with a pure-play focus and expanding the market with new clinical evidence and physician education,” Bauser said. “The stock trades well below the peer group (11.2x EV/EBITDA vs. 18.6x) despite strong fundamentals, and we expect continued earnings leverage from sales rep productivity and scale.”

Roth believes Electromed is positioned for sustainable growth as it expands market reach, increases physician engagement, and supports patients through a fully integrated service model. The high-frequency chest wall oscillation (HFCWO) therapy market it serves is growing at 8% year over year and remains underpenetrated.

We believe the stock’s setup is particularly compelling given the company’s large expanding market, clinically proven technology, broad payer coverage, consistent double-digit organic revenue growth, earnings leverage, growing sales force, robust cash flow, favourable balance sheet, and a strong leadership team that is incentivized to drive shareholder return,” Bauser said.

Bauser noted that Electromed shares recently reached a high of $35.43 before falling to around $18. He said the decline likely reflects profit-taking and broader market weakness tied to inflation, interest rate concerns, and geopolitical uncertainty, despite strong company fundamentals.

“For the fiscal third quarter ended March 31, 2025, Electromed delivered net revenue of $15.7M, representing a 13.1% year-over-year increase, driven by sustained momentum in its core direct homecare segment,” he said. “Homecare revenue grew 14.8% to $14.1M, a testament to increased sales rep productivity, streamlined reimbursement processes, and strong demand generation initiatives.

“On a per-rep productivity basis, Electromed continued to outperform its historical benchmarks. The annualized homecare revenue per weighted average direct sales rep reached $1.028M during the quarter, exceeding the company’s target range of $0.9M to $1M.”

Electromed is considering raising its FY26 benchmark after beating the current range in two of the last three quarters.

The company reported a 16.2% increase in operating income to $2.1-million and a 26.7% rise in net income to $1.9-million, or $0.21 per share. Gross margin grew to 78.0% from 74.8%, helped by better revenue per device. SG&A costs rose 17.2% with expanded sales and reimbursement teams. Electromed ended the quarter with $15.2-million in cash, no debt, and $43.9-million in equity.

“Importantly, $7.5M in positive operating cash flow for the nine-month fiscal YTD period helped offset $6.3M in share repurchases and $2.3M in taxes on equity compensation,” Bauser said. “On March 6, 2025, the Board authorized a new $5M share repurchase program. During Q3, the company repurchased $1.4M of stock under this authorization, bringing the YTD total to $6.4M (inclusive of prior repurchase programs).”

Electromed’s share repurchase program has offset stock-based compensation, keeping the diluted share count steady at 9.0 million, the same as in Q4 FY24.

Bauser thinks that Electromed will generate $13.3-million in Adjusted EBITDA on $63.3-million in revenue in fiscal 2025. He expects those numbers to improve to $15.4-million in EBITDA on $70.0-million in revenue in fiscal 2026.

Roth’s target reflects an 18.6x multiple on projected FY25 EBITDA of $13.3-million, with the estimate factoring in $15.2-million in cash, no debt, and 9.0 million shares outstanding.

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