MYOMO, INC. (MYO) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. Myomo makes the MyoPro, a powered arm and hand brace controlled by the wearer's own muscle signals, for people left with upper-limb paralysis after a stroke or other injury. Most sales come from fitting patients directly and billing their insurers ($30.4 million of 2025 revenue); the rest comes through clinical and medical providers such as orthotics and prosthetics practices ($10.5 million). More than 130 VA facilities have ordered devices. The turning point was Medicare: fees for the MyoPro's billing codes (L8701 and L8702) took effect in April 2024, and Medicare Part B patients accounted for 54% of 2025 revenue. Revenue has grown from $3.8 million in 2019 to $32.6 million in 2024 and $40.9 million in 2025. In 2025, 83% of revenue came from the United States, 16% from Germany and 1% from other countries. What the owners have actually earned. We measure owner earnings as operating cash flow, with working-capital swings stripped out, less stock-based compensation (a real cost paid in shares) and the capital spending needed to keep the business running. We count capitalized software development ($1.6 million in 2025) as capital spending. Rent-related lease lines stay in operating cash flow so that rent is still treated as a cost. On that basis Myomo has lost money in every one of the last ten years. Owner earnings were -$6.4 million (-$0.17 per share) in 2024 and -$15.8 million (-$0.38 per share) in 2025, when spending rose faster than revenue. We start from the median of those two years, about -$0.27 per share (roughly -$12 million a year on today's 42.7 million diluted shares), because the business with Medicare coverage only dates from 2024. Earlier years describe a much smaller company. Recent trend. The first half of 2026 was clearly better. Revenue rose 12% to $21.8 million, and gross margin rose to 70.3% from 65.0%. The operating loss fell to $5.4 million from $8.1 million, and operating cash outflow fell to $4.1 million from $11.5 million. Second-quarter revenue was $11.7 million, up 21%, with a 72.1% gross margin, and operating expenses were flat year on year. Last year owner earnings got worse, falling from -$6.4 million to -$15.8 million. Our base case instead assumes a smaller loss of about -$12 million for 2026, because the half-year results filed in August 2026 already show that improvement. Not everything points the same way: the backlog of approved patients awaiting delivery fell 27% during 2025 (from 272 to 199), even though the patient pipeline grew 10% to 1,528. Management is targeting 2026 revenue of $45 to $47 million and second-half cash burn under $2 million. We did not rely on those targets. Balance sheet and funding. At June 30, 2026, Myomo held about $13.5 million of cash and short-term investments against $12.5 million borrowed from Avenue Capital in November 2025. That loan is secured by all company assets. Its covenants require at least $2.5 million of cash at all times, revenue of at least 75% of the company's projections and a cap on cash burn. Shareholders' equity has fallen from $24.7 million at the end of 2024 to $5.8 million. The annual report lists keeping the NYSE American listing among its risks, and the lender can convert up to $3 million of principal into shares. Because the business still consumes cash, more share issuance is likely unless losses close quickly. Base case (about $0.06 per share). Revenue grows about 12.5% in 2026 to roughly $46 million and 14% in 2027. Growth then slows gradually (12%, 11%, 10%) to 8% a year from 2031 through 2035 and 5% a year through 2042. This rests on Medicare coverage, a growing clinic channel and Germany. Gross margin holds at 70%, the first-half 2026 level. Costs are about $28 million of fixed overhead growing 3% a year, plus variable selling and clinical costs of about 30% of revenue. On those assumptions losses shrink each year, operating income turns positive around 2033, and owner earnings follow a year later. Owner earnings then build to about $12 million a year by 2042 and fade to nothing by 2050, because the patents expire between 2027 and 2042 and nothing we can point to guarantees the position after that. Roughly a decade of losses cancels out almost all of the later profits, so the base case value is close to zero. Bull case (about $3.61 per share). The levers the company has already shown work well together. Revenue grows 15% in 2026 and 18% in 2027, in line with second-quarter 2026 growth of 21% and clinic-channel revenue up 130%. Growth then slows to 10% and later 6% a year. Gross margin holds at the second-quarter level of 72%. Variable costs are slightly lower at 28% of revenue, and overhead grows only 3% a year, in line with the record: selling and administrative costs stayed at $18.0 to $18.8 million from 2021 to 2023, and operating costs were flat in the first half of 2026. Owner earnings turn positive in 2030, and revenue passes $100 million in the early 2030s at roughly a 20% operating margin by 2040. The same fade applies after the patents expire. Bear case (about -$1.06 per share). Growth slows to 10% in 2026, then 8%, 7% and 6%, consistent with the 2025 backlog decline. Gross margin slips to 68%, still above 2025's 65.7%. Fixed costs rise 4% a year, echoing the cost growth of 2024 and 2025. The business loses about $13 million a year through 2029, and we assume nothing after that. In this case the company consumes about $45 million more cash, in today's money, than it ever returns, or roughly $1.06 per share. Those losses would be paid for with new shares or more borrowing, and the secured lender ranks ahead of shareholders. A negative value here means continuing losses, not debt larger than the business. Accounting notes. We deducted stock-based compensation ($2.1 million in 2025) in full. We removed the 2025 working-capital outflow of $3.9 million, mostly from paying down payables, as a timing effect. The annual report's narrative describes 2025 working capital as a cash inflow, but the audited cash-flow statement shows an outflow, and we used the statement. Per-share figures for years before 2020 are adjusted for the January 2020 one-for-thirty reverse split. What would make this wrong. Our value is most sensitive to how long losses last. If the first-half 2026 trend continues (flat costs, 70%+ gross margin and 20% growth) and owner earnings turn positive by 2027 instead of the early 2030s, the shares are worth roughly $1.30 on the same assumptions otherwise. A cut to Medicare fees, which drive more than half of revenue, or a breach of the loan covenants would push the outcome toward the bear case.