Tactile Systems Technology (TCMD), mcap=$253m, price $12.56 vs $10.30

TCMD pitch:
– Medical technology company with two products for treating underserved chronic conditions at home – Flexitouch for lymphedema and Afflovest for bronchiectasis/fibrosis.
– Currently, TCMD is underearning as investments in Flexitouch salesforce haven’t yet paid off due to covid.
– The sales of the second product (Afflovest, acquired in Sep’21) is still ramping up, but eventually, 50-60% of incremental revenue should drop down to EBIT.
– Market for Afflovest remains very large and underpenetrated.
– The demand has been so great thus far in 2022 – the company not only increased revenue guidance for Afflovest from $20m to $35m (100% yoy growth) and had to sign on a second source supplier to be able to meet the demand.

TCMD valuation:
– Assuming Afflovest sales of $70m by 2025, the product would do ~$25m of EBITDA with little capex requirements vs. current EV of $230m.
– Investors would be getting the remaining $208m of Flexitouch sales for free.

Exp. gain: +70% to $17/share in two years.

Full write-up (free guest account required):