Radnet (RDNT)

Healthcare

Two Rivers Analytics

Declining reimbursement rates coupled with rising expenses looks set to weigh on margins - earnings shortfalls should cause investors to rethink RDNT’s AI-inflated multiples. Medical imaging, notably core MRI reimbursement rates, are declining at CAGRs of 5-6%. All major operating expenses are rising, competition is increasing and capex requirements are high and ongoing. RDNT is also highly levered (5.5x trailing EBITDA). The stock is up >90% YTD and trades at nearly all-time high EV/Sales, EV/EBITDA and earnings multiples. Historically, it traded at a 40-50% EBITDA multiple discount to competitors, now it trades on par with them.

- 22 December, 2023