Hinge Health, Inc. (HNGE) stock intrinsic value fair value estimate & owner earnings analysis

Hinge Health sells a digital care program for joint and muscle pain. Members get app-based exercise therapy with motion tracking, a wearable nerve-stimulation device, and a care team of physical therapists, physicians and health coaches. The buyers are mostly self-insured employers, and 82% of 2025 revenue came through roughly 60 partners, mainly large national health plans and pharmacy benefit managers. Three partners each exceeded 10% of revenue in 2025: Health Care Service Corporation (17.5%), Elevance Health (13.7%) and Aetna (10.5%). None of them is required to work with Hinge exclusively. The business is growing fast. Revenue was $587.9 million in 2025 against $390.4 million in 2024, and $395.1 million in the first half of 2026 against $262.9 million a year earlier, about 50% growth in both. Reported net loss in 2025 was $528.3 million, but almost all of that was $643.0 million of stock compensation, $591.0 million of it recorded in the first half of 2025, around the company's initial public offering. Stock compensation has since fallen to $52.0 million in the second half of 2025 and $30.8 million in the first half of 2026. Net income in the first half of 2026 was $78.8 million. How we measured earnings. We start with operating cash flow, remove swings in working capital, and subtract stock compensation as a real cost. Two judgements matter. First, cash paid to capitalize sales commissions ($63.6 million in 2025) is treated as an ongoing cost of winning business, not a timing item, so it stays in. Second, customers pay up front, so deferred revenue keeps adding cash ahead of revenue ($83.2 million in 2025); we strip that out as timing. On this basis owner earnings were negative in 2023 through 2025 (2025 alone: about minus $537 million, driven by the one-time stock compensation charge). Those years say little about the business today: before 2025 the company was private and recorded almost no stock compensation, and its reported share counts before listing are not comparable with today's roughly 82 million diluted shares. We therefore judged the level from the most recent post-listing periods. The second half of 2025 was roughly $25 million and the first half of 2026 roughly $68 million by our approximate build. The first-half 2026 working-capital detail was only partly reconcilable from the filing data, so these are estimates. We set the earnings level at $75 million a year, about $0.91 per share, below the recent run rate. Because owner earnings were negative in the last full year, a growth rate cannot be measured on this basis, and the base case assumes no growth, so nothing here depends on the recent trend continuing. What we credited and what we left out. Most clients are billed in the first quarter of a member's subscription, and the obligation is satisfied within 12 months, so we found no multi-year contracts to count on. The 50% revenue growth is not credited: it depends on adding clients and members, and the company has not yet run this model through a downturn. Only the level of earnings already achieved is counted. Cash and investments are not added; the analysis values the operating business. Base case, $8.60 per share. Owner earnings hold at $75 million for ten years, then fade in a straight line to zero over the next ten, discounted at 6%. Nothing supports earnings beyond that, and repeat client renewals are not disclosed in the filing, so the tail is allowed to run off. Bear case, $2.40 per share. The largest partner, Health Care Service Corporation at 17.5% of revenue, moves its business elsewhere or renews on worse terms, and stock compensation stays elevated (a further $93.0 million of grants is still to be expensed over about 2.3 years). Owner earnings fall to $35 million, hold for five years and fade to zero over the following five. Bull case, $14.90 per share. The recent first-half 2026 run rate of roughly $130 million a year proves durable, holds for ten years, then fades over the next ten. This uses only what the last two quarters have already produced, with no further growth. What would prove this wrong: a partner-level loss larger than we assumed, stock compensation reverting to 2025 levels, or a working-capital reversal if billing shifts away from up-front payment. The company's founders and Series E holders also hold concentrated voting control through high-vote shares, which limits ordinary shareholders' say. Because the record is short and revenue is concentrated, the margin-of-safety price is set at a large discount to the base case, about half.