QuidelOrtho (QDEL)

Healthcare diagnostics company QuidelOrtho (NASDAQ:QDEL) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 3.7% year on year to $699.9 million. The company expects the full year’s revenue to be around $2.71 billion, close to analysts’ estimates. Its non-GAAP profit of $0.80 per share was 71.6% above analysts’ consensus estimates.

Company Overview

Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ:QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.

The medical devices and supplies industry, particularly those specializing in imaging and diagnostics, operates with a comparatively stable yet capital-intensive business model. Companies in this space benefit from consistent demand driven by the essential nature of diagnostic tools in patient care, as well as recurring revenue streams from consumables, service contracts, and equipment maintenance. However, the industry faces challenges such as significant upfront development costs, stringent regulatory requirements, and pricing pressures from hospitals and healthcare systems, which are increasingly focused on cost containment. Looking ahead, the industry should enjoy tailwinds from advancements in technology, including the integration of artificial intelligence to enhance diagnostic accuracy and workflow efficiency, as well as rising demand for imaging solutions driven by aging populations. On the other hand, headwinds could arise from a rethinking of healthcare costs potentially resulting in reimbursement cuts and slower capital equipment purchasing. Additionally, cybersecurity concerns surrounding connected medical devices could introduce new risks and complexities for manufacturers.

QuidelOrtho competes with several major players in the diagnostic testing market, including Abbott Laboratories (NYSE:ABT), Roche (OTC:RHHBY), Thermo Fisher Scientific (NYSE:TMO), Danaher (NYSE:DHR), and Siemens Healthineers (OTC:SMMNY).

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 $2.71 billion in revenue over the past 12 months, QuidelOrtho has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, QuidelOrtho struggled to consistently increase demand as its $2.71 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and suggests it’s a low quality business.

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. QuidelOrtho’s recent performance shows its demand remained suppressed as its revenue has declined by 6.8% annually over the last two years.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 6.1% year-on-year declines. Because this number aligns with its normal revenue growth, we can see that QuidelOrtho has properly hedged its foreign currency exposure.

This quarter, QuidelOrtho’s revenue fell by 3.7% year on year to $699.9 million but beat Wall Street’s estimates by 5.2%.

Looking ahead, sell-side analysts expect revenue to grow 1.5% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

QuidelOrtho’s high expenses have contributed to an average operating margin of negative 1.5% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Looking at the trend in its profitability, QuidelOrtho’s operating margin decreased by 76.7 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 41.1 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

QuidelOrtho’s operating margin was negative 101% this quarter. The company's consistent lack of profits raise a flag.

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.

Sadly for QuidelOrtho, its EPS declined by 25.3% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Diving into the nuances of QuidelOrtho’s earnings can give us a better understanding of its performance. As we mentioned earlier, QuidelOrtho’s operating margin declined by 76.7 percentage points over the last five years. Its share count also grew by 56%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q3, QuidelOrtho reported adjusted EPS of $0.80, down from $0.85 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects QuidelOrtho’s full-year EPS of $2.29 to grow 19.3%.

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.

QuidelOrtho has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.8% over the last five years, better than the broader healthcare sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that QuidelOrtho’s margin dropped by 30.8 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

QuidelOrtho’s five-year average ROIC was negative 7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

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. Unfortunately, QuidelOrtho’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

QuidelOrtho reported $98.1 million of cash and $2.81 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $594 million of EBITDA over the last 12 months, we view QuidelOrtho’s 4.6× net-debt-to-EBITDA ratio as safe. We also see its $84.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly QuidelOrtho blew past analysts’ constant currency revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 4% to $28.49 immediately after reporting.

Updated: December 4, 2025 at 10:31 PM EST

When considering an investment in QuidelOrtho, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

QuidelOrtho doesn’t pass our quality test. First off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its impressive operating margins show it has a highly efficient business model, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

QuidelOrtho’s P/E ratio based on the next 12 months is 13x. This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $37.67 on the company (compared to the current share price of $27.93).

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.