Surgical Instrument and Device Company Valuations – December 2023 Update

Surgical instrument and device companies experienced gradual revenue and EBITDA growth over the last five years. Valuations increased through 2021, before contracting in 2022 and 2023. This article will explore some of the trends that appear to impact the valuations of publicly-traded surgical instruments and device companies.

This article updates our December 2022 analysis.

Important notes: This article examines potential driving factors for surgical instrument and device company valuations from a financial statement perspective. An actual business valuation requires an in-depth analysis of the business operations and associated risk factors that are not always evident from the data on financial statements. Also, to keep the length manageable, this article will focus on what the author interpreted as the primary value drivers. It will not touch on every observation in the data. For a quick read on the basic concepts of risk and return and how they apply in the context of this article, please visit: What is Value? and Risk and Return in the Market Approach.

The industry constituents for this analysis are listed below. The effective date of this analysis is December 30, 2023.

List of constituents analyzed in this article

Figure 1 summarizes three items for the surgical instruments/device companies:

  • Total enterprise value calculated as the sum of market capitalization and interest-bearing debt less cash;
  • Median revenues; and
  • Median earnings before interest, taxes, depreciation, and amortization (“EBITDA”).

We notate the latest fiscal year as “LFY” (2022), and the latest 12 months as “LTM” (latest available information as of December 30, 2023).

Fig. 1 - Trend of historical enterprise value, revenue, and EBITDA

Figure 1 illustrates the industry’s march to ever-higher valuations through 2021, which mostly coincided with improvements in financial performance. In 2022, however, revenue growth slowed, EBITDA stagnated, and valuations declined. We previously identified that a deceleration in capital investment in the med-tech industry (specifically the smaller operators that drive innovation) may have caused a broad decline in valuations in 2022.

Revenue and EBITDA growth resumed in 2023 but was not matched by an increase in valuations. Let’s take a closer look at what industry-specific factors drove down valuations.

Valuation Multiples

Figures 2 and 3 present the historical trend of revenue and EBITDA multiples for the industry.

Fig. 2 – Trend of historical median revenue multiples
Fig. 3 – Trend of historical median EBITDA multiples


Based on Figures 2 and 3, the median valuation multiples increased through 2020 before declining in 2021 and 2022. Revenue multiples continued to decline through the end of 2023, while EBITDA multiples increased.

The Growth Story

Growth often has a strong influence on how companies are valued. Next, we present a summary of the consensus forecasts for each group in Figures 4 and 5 below (note that “NFY” means next fiscal year; NFY = calendar 2023 for most companies).

Fig. 4 – Comparison of historical and projected revenue growth: prior year vs. current year
Fig. 5 - Comparison of historical and projected EBITDA growth: prior year vs. current year


In Figures 4 and 5, the orange line represents data as of December 2022. The blue line in Figures 4 and 5 represents information as of December 2023. Given the availability of public filings at the time this article was written, LFY for both lines is representative of 2022 financial statement data. Therefore, the major differences shown in Figures 4 and 5 are the changes in expected growth rates for 2023 and beyond.

As of December 2022, projections for the industry suggested strong growth in revenue and EBITDA for 2023 and 2024. A year later, growth expectations improved, with higher revenue growth expectations for the next three years.

We looked to identify a meaningful correlation between growth and observed valuation multiples. Companies that generate high levels of growth often trade at higher multiples than their lower-growth counterparts. In Figures 6 and 7, we plot revenue and EBITDA multiples against projected growth rates.

Fig. 6 – Chart plotting revenue multiples against projected revenue growth rates
Fig. 7 – Chart plotting EBITDA multiples against projected EBITDA growth rates


The data shown in Figures 6 and 7 appear to suggest some correlation between valuation multiples and projected growth rates. However, based on the dispersion of the datapoints, growth did not seem to be the only factor impacting the magnitude of valuation multiples.

See also: Need to prepare financial statement projections? See A Practical Guide to Financial Statement Forecasts for Business Valuations.

The Size Story

Larger companies are generally perceived to have lower levels of risk relative to smaller companies. This dynamic can be due to several factors, including improved product or geographic diversification, deeper management teams, access to various distribution channels, and better availability of capital. Revenue multiples are plotted against size (as measured by market capitalization) in Figure 8.

Fig. 8 – Chart plotting revenue multiples against market capitalization

As shown in Figure 8, there appeared to be some tendency for larger companies to trade at higher valuation multiples. We noted some dispersion in the data, suggesting that other factors may have a stronger impact on the valuation multiples of certain companies. For example, LeMaitre Vascular was among the smallest companies of its peers but traded at one of the highest revenue multiples. This is likely due to its high expected revenue and EBITDA growth rates, which rank among the highest of the group analyzed.

The Profitability Story

Revenue multiples are typically heavily influenced by profitability. We usually observe higher revenue multiples in companies with higher levels of profitability. This relationship appears to hold for the publicly-traded surgical instrument and device companies, as seen in Figure 9 below.

Fig. 9 – Chart plotting revenue multiples against EBITDA margins

While there are inconsistencies among the observed data points, companies with greater projected profit margins appeared to trade at higher revenue multiples.

The Leverage Story

Debt usage tends to increase financial risk to equity holders. Debt holders have a senior position within a company’s capital structure, and debt servicing occurs before any cash flow benefits (i.e., dividends) are issued to equity holders. Figure 10 plots LTM revenue multiples against their associated debt to total capital ratios (as available).

Fig. 10 – Chart plotting revenue multiples against debt-to-capital ratios

In Figure 10, companies with lower debt ratios tended to trade at higher valuation multiples than their more leveraged counterparts.

Tying it All Together

The trends observed in this article suggest that investors are considering multiple factors when valuing companies in the surgical instruments and device industry. Interestingly, we observed a stronger correlation between valuation multiples and leverage ratios than with growth rates. A summary of the observations in this article is presented below and compared to our December 2022 analysis.

The relationships between valuation multiples and certain factors noted above were noted to include some dispersion in the observed datapoints (growth and size). This would suggest that valuations of companies in the industry may give more important consideration to certain factors than others.

I hope you found this analysis helpful. Any input, feedback, suggestions, and questions (including disagreements with my high-level analysis) are welcome! Thanks for reading.