Key Takeaways TMDX reported Q4 EPS of 57 cents, up 200% year over year, beating estimates by 39%.TransMedics posted 32% revenue growth in Q4, driven by the Organ Care System and logistics expansion.TMDX sees 2026 revenues of $727M-$757M, implying 20-25% growth over 2025 levels.TransMedics Group (TMDX) delivered earnings per share (EPS) of 57 cents in the fourth quarter of 2025, excluding a one-time benefit related to deferred tax assets, which surged 200% year over year. The figure surpassed the Zacks Conse ...

Core Thesis - TransMedics Group, Inc. (TMDX) is positioned favorably in the organ transplantation market with its innovative Organ Care System, which enhances organ viability and expands the transplantable organ pool [2][3]. Company Overview - TransMedics is a U.S.-based medtech company that has shifted from selling hardware to a recurring-revenue model, retaining ownership of its Organ Care System consoles and generating revenue from high-margin consumables and clinical services [2]. - The company has developed a comprehensive approach that includes training and certification for hospital staff, creating significant switching costs and integrating deeply into transplant workflows [3]. Technology and Market Position - The Organ Care System technology is recognized as superior to competitors, with FDA approvals for heart, lung, and liver transplants, and kidney applications anticipated by 2027 [3]. - By extending preservation times and minimizing cold ischemia, TransMedics addresses inefficiencies in organ donation, potentially increasing the overall transplant market [3]. Financial Performance - TransMedics achieved profitability in 2024, with Q3 2025 revenue reported at $144 million and gross margins nearing 60% [4]. - The company holds approximately 19% market share in U.S. heart, lung, and liver transplants, with opportunities for increased penetration and entry into kidney transplants [4]. Growth Potential - Management targets operating margins of 30% and aims for significantly higher transplant volumes, indicating a strong multi-year growth outlook [5]. - Potential international expansion and entry into kidney transplants could further enlarge the addressable market, although challenges exist in Europe due to existing protocols and lower-cost alternatives [4][5]. Stock Performance - TMDX's stock price has increased by approximately 45.04% since previous bullish coverage, driven by improving profitability and adoption momentum [6].

Core Insights - Sustained outperformance in MedTech requires structural demand drivers, improving execution, and clear earnings visibility rather than just short-term market rallies [2][6] - A select group of MedTech stocks, including TransMedics (TMDX), KORU Medical Systems (KRMD), and Cardinal Health (CAH), have significantly outperformed the S&P 500, which rose 19.3% over the past year [3][8] TransMedics (TMDX) - TMDX shares increased by 89.8% over the past year, driven by the adoption of its Organ Care System (OCS) and the expansion of its National OCS Program (NOP) [7][10] - The company reported revenues of $143.8 million in Q3 2025, reflecting a 32% year-over-year growth, with service revenues rising 35% [9][10] - The Zacks Consensus Estimate for 2026 sales is $723.8 million, indicating approximately 20.5% growth, with plans for European expansion [10][11] KORU Medical Systems (KRMD) - KRMD achieved a 45.5% stock growth over the past year, with Q3 2025 revenues of $10.4 million, marking a 27% year-over-year increase [13][15] - Core SCIg revenues grew about 30%, supported by international expansion and market share gains, despite a dip in U.S. revenues due to inventory adjustments [14][15] - The Zacks Consensus Estimate for 2026 sales is $49 million, implying 20.2% growth, with ongoing advancements in non-Ig drug collaborations [15][16] Cardinal Health (CAH) - CAH stock surged by 35.3% over the past year, with Q1 fiscal 2026 revenues of $64 billion, up 22% year-over-year, and earnings per share of $2.55, representing 36% growth [18][20] - The Pharmaceutical and Specialty Solutions segment led performance, with 23% revenue growth and 26% profit growth [19][20] - Management raised full-year fiscal 2026 earnings per share guidance to $9.65-$9.85, indicating 17-20% growth, while also returning $500 million to shareholders [20][21]

Core Thesis - TransMedics Group, Inc. (TMDX) is viewed positively due to its strong revenue growth, operational efficiencies, and potential for international expansion, despite a recent minor revenue miss leading to initial stock volatility [1][2][5]. Financial Performance - TMDX reported Q3 2025 revenue of $143.8 million, reflecting a 32% year-over-year growth, marking the 15th consecutive quarter of over 30% growth [2][3]. - The company experienced a significant increase in operating income, which surged nearly fivefold to $23.3 million, resulting in a 16.2% operating margin [3]. - Gross margins expanded by 290 basis points to 59%, driven by operational efficiencies and fleet optimization [3]. Market Expansion - International sales are currently modest at $3.6 million, but TMDX is preparing for expansion with the National Organ Care System Program set to launch in Italy in the first half of 2026, aiming for broader European engagement by FY27 [3][4]. - The upcoming Gen 3 Organ Care System platform and the 2027 launch of the kidney program are expected to significantly increase the addressable market [4]. Valuation and Investment Case - TMDX's forward revenue multiple stands at 6.8x, which is considerably lower than peers, indicating it may be undervalued relative to recent sector acquisitions [5]. - The company's operational momentum, expanding competitive moat, and multi-year growth visibility support a strong long-term investment case [5][6].

Core Insights - The article reflects on the importance of learning from past investment decisions, highlighting two stocks that have provided valuable lessons and solid returns [1][2] Group 1: Amazon Case Study - Amazon's Fire Phone was a significant misstep, leading to the decision to sell the stock despite its previous strong performance [3][4] - The stock, which had nearly tripled in value, ultimately became a 14-bagger, demonstrating the importance of long-term thinking and trust in management [4][6] - Key lessons learned include avoiding short-term thinking, trusting founder-led management, and not betting against innovation [6][7] Group 2: TransMedics Group Analysis - TransMedics Group, a provider of Organ Care Systems, was purchased at the beginning of 2023 and initially saw gains before a significant drop in share price following an acquisition announcement [9][10] - Despite initial concerns about the acquisition of Summit Aviation impacting margins, the company’s stock has since tripled from its lows, with sales more than doubling [12][14] - Recent financial performance includes a 32% increase in transplant revenue and a 35% rise in logistics revenue, with a net profit margin of 17% [16] - TransMedics aims to expand its transplant operations significantly and enter new markets, which could provide substantial growth opportunities [16][17]