LeMaitre (LMAT)

Medical device company LeMaitre Vascular (NASDAQ:LMAT) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 12% year on year to $59.87 million. Guidance for next quarter’s revenue was optimistic at $62.5 million at the midpoint, 2.2% above analysts’ estimates. Its GAAP profit of $0.48 per share was 4.6% below analysts’ consensus estimates.

Company Overview

Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.

The surgical equipment and consumables industry provides tools, devices, and disposable products essential for surgeries and medical procedures. These companies therefore benefit from relatively consistent demand, driven by the ongoing need for medical interventions, recurring revenue from consumables, and long-term contracts with hospitals and healthcare providers. However, the high costs of R&D and regulatory compliance, coupled with intense competition and pricing pressures from cost-conscious customers, can constrain profitability. Over the next few years, tailwinds include aging populations, which tend to need surgical interventions at higher rates. The increasing integration of AI and robotics into surgical procedures could also create opportunities for differentiation and innovation. However, the industry faces headwinds including potential supply chain vulnerabilities, evolving regulatory requirements, and more widespread efforts to make healthcare less costly.

LeMaitre Vascular competes with several larger medical device companies including Abbott, Baxter International, Becton Dickinson, Edwards Lifesciences, Getinge, Terumo Medical Corporation, and W.L. Gore & Associates, as well as specialized competitors like Artivion, LifeNet Health, and Silk Road Medical.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $226.3 million in revenue over the past 12 months, LeMaitre is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, LeMaitre’s sales grew at a solid 13.7% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. LeMaitre’s annualized revenue growth of 15.6% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

LeMaitre also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, LeMaitre’s organic revenue averaged 14.5% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, LeMaitre reported year-on-year revenue growth of 12%, and its $59.87 million of revenue exceeded Wall Street’s estimates by 3.7%. Company management is currently guiding for a 11.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.9% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and implies the market is forecasting success for its products and services.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

LeMaitre has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 21.3%.

Looking at the trend in its profitability, LeMaitre’s operating margin of 23.4% for the trailing 12 months may be around the same as five years ago, but it has increased by 7.6 percentage points over the last two years.

This quarter, LeMaitre generated an operating profit margin of 21.1%, down 1.1 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

LeMaitre’s EPS grew at an astounding 18.1% compounded annual growth rate over the last five years, higher than its 13.7% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q1, LeMaitre reported EPS at $0.48, up from $0.44 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects LeMaitre’s full-year EPS of $1.98 to grow 17.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

LeMaitre has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 18.2% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that LeMaitre’s margin dropped by 11.8 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although LeMaitre hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.6%, impressive for a healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, LeMaitre’s ROIC averaged 2 percentage point increases over the last few years. This is a good sign, and we hope the company can keep improving.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

LeMaitre is a well-capitalized company with $302.5 million of cash and $185.4 million of debt on its balance sheet. This $117.2 million net cash position is 5.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was great to see LeMaitre’s full-year revenue guidance top analysts’ expectations. We were also glad its organic revenue outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed significantly and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 1.1% to $89.25 immediately after reporting.

Updated: May 22, 2025 at 11:26 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in LeMaitre.

LeMaitre isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its subscale operations give it fewer distribution channels than its larger rivals. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its cash profitability fell over the last five years.

LeMaitre’s P/E ratio based on the next 12 months is 34.2x. At this valuation, there’s a lot of good news priced in - we think there are better investment opportunities out there.

Wall Street analysts have a consensus one-year price target of $104.50 on the company (compared to the current share price of $79.12).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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