Artivion (AORT)

Medical device company Artivion (NYSE:AORT) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 1.6% year on year to $98.98 million. The company’s full-year revenue guidance of $429 million at the midpoint came in 1.2% above analysts’ estimates. Its non-GAAP profit of $0.06 per share was $0.02 above analysts’ consensus estimates.

Company Overview

Formerly known as CryoLife until its 2022 rebranding, Artivion (NYSE:AORT) develops and manufactures medical devices and preserves human tissues used in cardiac and vascular surgical procedures for patients with aortic disease.

The medical devices and supplies industry, particularly in the fields of cardiology, neurology, and vascular care, benefits from a business model that balances innovation with relatively predictable revenue streams. These companies focus on developing life-saving devices such as stents, pacemakers, neurostimulation implants, and vascular access tools, which address critical and often chronic conditions. The recurring need for these devices, coupled with growing global demand for advanced treatments, provides stability and opportunities for long-term growth. However, the industry faces hurdles such as high research and development costs, rigorous regulatory approval processes, and reliance on reimbursement from healthcare systems, which can exert downward pressure on pricing. Looking ahead, the industry is positioned to benefit from tailwinds such as aging populations (which tend to have higher rates of disease) and technological advancements like minimally invasive procedures and connected devices that improve patient monitoring and outcomes. Innovations in robotic-assisted surgery and AI-driven diagnostics are also expected to accelerate adoption and expand treatment capabilities. However, potential headwinds include pricing pressures stemming from value-based care models and continued complexity changing from navigating regulatory frameworks that may prioritize further lowering healthcare costs.

Artivion competes with several major medical device companies across its product lines. In mechanical heart valves, its main competitors include Abbott Laboratories, Medtronic, and Corcym. For aortic stent grafts, it competes with Medtronic, Gore, Terumo, Cook, and BD. In the surgical sealants market, Artivion faces competition from Baxter, Ethicon, and Integra LifeSciences.

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 $390.1 million in revenue over the past 12 months, Artivion 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 many enduring ones grow for years. Regrettably, Artivion’s sales grew at a mediocre 7.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the healthcare sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Artivion’s annualized revenue growth of 10.4% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, Artivion reported modest year-on-year revenue growth of 1.6% but beat Wall Street’s estimates by 4.2%.

Looking ahead, sell-side analysts expect revenue to grow 12.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and indicates its newer products and services will spur better top-line performance.

Artivion was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.9% was weak for a healthcare business.

On the plus side, Artivion’s operating margin rose by 2.1 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its recent improvements as the company’s margin has increased by 3.8 percentage points on a two-year basis.

In Q1, Artivion generated an operating profit margin of 2.2%, down 23.8 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

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.

Artivion’s EPS grew at an unimpressive 3% compounded annual growth rate over the last five years, lower than its 7.2% annualized revenue growth. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Diving into the nuances of Artivion’s earnings can give us a better understanding of its performance. A five-year view shows Artivion has diluted its shareholders, growing its share count by 12.9%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Artivion reported EPS at $0.06, in line with the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Artivion’s full-year EPS of $0.25 to grow 164%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Artivion’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 1.6%. This means it lit $1.61 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Artivion failed to improve its margin during that time. Its unexciting margin and trend likely have shareholders hoping for a change.

Artivion burned through $20.59 million of cash in Q1, equivalent to a negative 20.8% margin. The company’s cash burn was similar to its $9.10 million of lost cash in the same quarter last year.

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).

Artivion historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.9%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

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. On average, Artivion’s ROIC increased by 3.5 percentage points annually over the last few years. This is a good sign, and we hope the company can continue improving.

Artivion reported $37.69 million of cash and $362.4 million 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 $71.5 million of EBITDA over the last 12 months, we view Artivion’s 4.5× net-debt-to-EBITDA ratio as safe. We also see its $17.88 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 Artivion blew past analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 4.6% to $24.90 immediately after reporting.

Updated: May 22, 2025 at 11:45 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 Artivion.

Artivion isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue growth was mediocre over the last five years. And while its growth in medical devices was splendid, the downside is its subscale operations give it fewer distribution channels than its larger rivals. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Artivion’s P/E ratio based on the next 12 months is 42.3x. This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $32.33 on the company (compared to the current share price of $28.46).

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.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.