IRADIMED CORP (IRMD) stock intrinsic value fair value estimate & owner earnings analysis

Iradimed makes medical equipment that can be used safely inside an MRI scanner room, where the scanner's powerful magnet makes ordinary metal devices dangerous. Its main products are the MRidium MRI-compatible IV infusion pump, the 3880 MRI-compatible patient vital-signs monitor and a ferromagnetic detection system. It also sells the single-use tubing sets and other disposables that these devices use up. Revenue in 2025 was $83.8 million: $31.6 million from pumps, $26.4 million from monitors, $1.9 million from ferromagnetic detectors, $17.6 million from disposables and $6.3 million from maintenance agreements, services and other items. About 84% of sales were in the United States. Why the business earns what it does. The company says its MRidium pumps are the only MRI-compatible IV infusion pumps on the market. It holds 21 issued US patents with remaining lives of up to 19 years. The alternatives are shielded boxes from B. Braun, Fresenius Kabi and MIPM, or running long tubing from ordinary pumps kept outside the room. Monitors face tougher competition. The company names Invivo, now owned by Philips, as the market leader, alongside GE Healthcare and Schiller. Invivo was founded by Iradimed's own founder and CEO, Roger Susi. Gross margin was 77% and net income was 26.8% of revenue in 2025. The company has no debt, paid $15.0 million in dividends in 2025 and held $51.2 million of cash at year-end. How we measured earnings. We measure the cash the business produces for its owners. We start from operating cash flow and remove short-term working-capital swings. We count stock compensation as a real cost. We deduct only the capital spending needed to keep the business running. Two judgement calls matter. First, from 2023 to 2025 the company spent about $21 million on land and a new 62,000-square-foot headquarters and plant in Orlando, Florida. The building opened in the third quarter of 2025 and was paid for in cash. We treat this as a one-time growth investment, not an ongoing cost. Routine capital spending, including capitalized development costs, has otherwise run at about $1.3 to $1.9 million a year, and spending on property and equipment in the first half of 2026 was only $0.6 million. Second, 2025 cash taxes were about $2.7 million lower than the tax expense, because the July 2025 federal tax law brought back faster write-offs for buildings and research spending. The company says this will lower its cash taxes over the next several years. Because it is largely a timing benefit, we left it out of the earnings base. On this basis, owner earnings were about $1.75 per share in 2025, compared with $1.46 in 2024 and $1.36 in 2023. They closely match reported net income, because depreciation and routine capital spending roughly cancel out. Starting point. We start from the 2025 level of about $1.75 per share, not an average of earlier years. The quarters since mid-2025 support that level: net income was $12.0 million in the second half of 2025 and $11.0 million in the first half of 2026. Growth has slowed, however. Revenue in the second quarter of 2026 was $20.5 million, flat on a year earlier, and profit for the quarter fell about 10%. Revenue for the first half rose 6%. Owner earnings grew about 20% in 2025 on our adjusted basis. We assume only 4% growth for 2026. The base case rests on the new MRidium 3870 pump. The FDA cleared it in May 2025 and the first units shipped in December 2025. It replaces a pump design introduced in 2009. We assume it drives upgrades by existing customers as well as new sales, and that disposables grow along with the number of pumps in use. Owner earnings grow 10% to 12% a year in 2027 to 2029, slowing to 4% by 2035, when they reach about $3.47 per share. After 2035 we hold earnings flat for twenty years and then assume nothing more. The company's patents and its record of renewing its product line support that period, but nothing beyond it. This case is worth $41.60 per share. The bear case uses risks the company has already faced. In September 2014 an FDA warning letter made it stop US sales of the affected pumps until they were cleared again in December 2016. Revenue fell 29% in 2017, when owner earnings nearly disappeared, and fell 18% again in 2020. The company relies on single suppliers for some critical parts, some of them made in China or Taiwan, and it depends heavily on its founder. The bear case assumes a similar setback from a regulatory problem, a stalled 3870 changeover or lost monitor share to much larger rivals. That cuts 2027 owner earnings to about $1.15 per share. Earnings then recover slowly, at 3% to 8% a year, stay flat for ten years after 2035 and fade to nothing over five more. This case is worth $18.35 per share. The company has no debt, so the downside comes from the business itself, not from its balance sheet. The bull case assumes the 3870 upgrade cycle goes well. It also assumes the pump market, which the company calls underpenetrated, keeps growing as it has since 2021, when revenue was $41.8 million. Owner earnings grow 13% to 16% a year in 2027 to 2029 and reach about $4.65 per share by 2035. They then grow 3% a year for ten years and stay flat for twenty more. This case is worth $67.82 per share. We discount all three cases at a flat 6% a year. We do not add the cash on top, because the interest it earns is already counted in earnings. Margin-of-safety price. The company has no debt, a leading position in its niche and a long record. But it depends on a few products, one regulator and its founder, and the bear case is less than half the base case. The margin-of-safety price is $27.00 per share, about 35% below the base case, and no business condition needs to be met first. What would prove this wrong: a new FDA enforcement action; a larger device maker entering the MRI-compatible infusion pump market; or the flat second quarter of 2026 turning out to be the start of a long stall rather than a pause around the 3870 launch.