Equity research firms see upside for medtech Compumedics
Compumedics has received endorsements from two equity research firms — East Coast Research and PAC Partners.
Two equity research firms endorse Compumedics and see upside to share price
Recent FDA clearance for its next-generation home sleep tests set to open lucrative new market
Neuroscan Orion LifeSpan magnetoencephalography system also provides opportunity to boost revenue
Special Report: Compumedics has received endorsements from two equity research firms — East Coast Research and PAC Partners— both of which see upside potential in the company’s share price and strong opportunities in large, growing markets for its products.
Compumedics (ASX:CMP) is a global medical device company that develops, manufactures and commercialises diagnostic technology for sleep, brain and ultrasonic blood flow monitoring.
The company was founded in 1987, the same year it launched Australia’s first fully computerised sleep clinic at Melbourne’s Epworth Hospital.
Listed on the ASX in 2000, Compumedics owns US-based Neuroscan and Germany-based DWL Elektronishe Systeme GmbH.
In conjunction with these two subsidiaries, East Coast Research said in its report on Compumedics that it had a broad international reach.
The firm has assigned Compumedics a fair valuation of 67 cents per share, sitting between their base-case DCF valuation of 50 cents and bull-case of 83 cents.
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Growing the home sleep testing market
East Coast said Compumedics’ recent US Food and Drug Administration (FDA) clearance for its trademarked, next-generation home sleep tests (HST) Somfit and Falcon, opened a lucrative new market.
According to East Coast, Somfit’s launch in the US HST market, which sees around two million studies annually, positions Compumedics to tap into a potential market of four million tests a year and US$120–200 million in SaaS revenue.
“With FDA clearance, Somfit offers a competitive advantage with its scalable, clinical-grade and convenient at-home monitoring,” East Coast said.
“Compumedics' initial focus on Australia has paved the way for rapid expansion of Somfit into other markets, including the US.”
East Coast said additionally, the Falcon HST device complemented Somfit with more advanced capabilities, catering to more demanding sleep practice requirements.
“The Falcon has already gained traction in Australia, indicating promising sales prospects in the larger US market,” it said.
In a report, Pac Partners said with ~80% (60 million) undiagnosed sleep apnoea cases in the US alone, the demand for simple and accessible sleep diagnostics was surging.
“This market is growing at 25% per annum and will surpass the US hospital sleep test market of US$150m/annum (growing at 8%pa),” the firm said.
“CMP claims to be close to 70% of the diagnostic power of hospital grade tests with independent assessment support, particularly with measuring REM (rapid eye movement) sleep.”
Pac Partners said for CMP to reach its target of 10-20% market penetration in US home sleep testing in the medium term, then it needs to:
- Develop a disposable Somfit (aim for launch is H1 CY26);
- Partner with four of the largest 10 home testing platforms; and
- Become US standard for government and fund reimbursement.
“This move from B2B to B2C culture is a massive shift in culture and supply chain relationship, and the new team under Craig Sullivan (ex-Itamar) has early high energy and early results on the board,” the firm said.
Neurodiagnostics and MEG Imaging for Brain Activity Analysis
East Coast said the neurology diagnostics market was also expanding due to rising neurological disorders, technological advancements and demand for minimally invasive procedures, providing an opportunity for Compumedics.
Compumedics recently announced a world-first breakthrough with its trademarked Neuroscan Orion LifeSpan magnetoencephalography (MEG) system.
In collaboration with Beijing Fistar – the company’s long-term Chinese distributor for its brain research technology – and Tianjin Normal University (TJNU), Compumedics recorded brain activity in children using its MEG system.
MEG is a non-invasive brain imaging technique that maps neural activity by detecting the magnetic fields produced by the brain’s electrical signals.
The Neuroscan Orion LifeSpan MEG system includes advanced MEG sensors, a dual-helmet dewar for adult and paediatric use, and a virtual 100% efficient coolant recycling system.
East Coast said Compumedics had transformed MEG by delivering greater precision through a fully integrated system that included its advanced CURRY brain analysis software.
“Moreover, commercial success of Compumedics’ Orion MEG is now more likely than ever with the successful installation at China’s prestigious Tianjin Normal University, providing validation from a strong key opinion leader in the field,” East Coast said.
Revenue model fosters customer relationships
Pac Partners said Compumedics had successfully implemented a “pay-per-use” model for its MEG technology, fostering long-term engagement with research hospitals and neurology centres.
“This model not only enhances revenue predictability but also lowers the adoption barrier for institutions looking to implement MEG without large upfront capital,” the firm said.
Pac Partners said Compumedics was in 70% of the 200 MEG systems installed globally, as market leader Elekta relied on CMP’s advanced CURRY software.
Following Elekta’s acquisition by Megin, CMP capitalised on the opportunity to emerge as a dominant force in next-generation MEG systems.
East Coast said Compumedics had become the preferred supplier for top researchers, universities and hospitals worldwide.
Its equipment has been installed at the Mayo Clinic, Cleveland Clinic, NASA and renowned hospitals in the US, Australia, UK and Germany.
“Overall, Compumedics' increasing footprint in globally recognised institutions positions it well for long-term revenue growth and market leadership in medical diagnostics,” East Coast said.
The firm said Compumedics distributed its products through a well-established international network of distributors and direct sales offices.
Its global headquarters is in Melbourne with regional field offices in the US, France, Austria, Korea and Germany.
“This sales model, combining direct sales and distributor partnerships, maximises market reach and efficiency, enhances brand credibility and fosters stronger partnerships,” East Coast said.
Compumedics’ EBITDA ‘miss as a speed bump
Compumedics recently lowered its FY25 EBITDA guidance from ~$5m to ~$3m because forecast revenue fell from above $55m to around $50m to $55m.
The company retains a FY26 forecast EBITDA guidance of $9m, a tripling of the FY25 forecast result.
Pan Pac said it viewed the updated EBITDA guidance “as a speed bump from a slip in base unit delivery and maybe loose margin discipline with new products”.
It believes Compumedics can improve with “changes to its sales culture and supply chain”.
“We believe CMP's home test and brain measurement with superior equipment is compelling and retain our buy,” Pan Pac said.
It has reduced its 12-month price target 20% to 48 cents per share.
“Our long term DCF valuation is reduced 6% to $0.70/share (9x FY27F EV/EBITDA) for the modest cash reduction.
“We believe both Somfit and MEG will deliver recurring revenue around its base.”
This article was developed in collaboration with Compumedics, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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