Conmed | They Lost Half Their Value…But the Business Got Stronger
Conmed’s sales, cash flow, and capital returns are all up since 2021. Why is the stock still in the gutter?
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The Turnaround Investment Newsletter
This article covers Conmed (CNMD). A global niche medtech company down over 70% while revenue, margins, share count, and returns on capital move in the right direction.
Please note this is NOT a company I own. This is an idea I thought worth sharing.
By the end of this, you’ll know:
✅What they do.
✅Why they are interesting today.
✅What questions I still have.
✅The risks.
✅My back of the napkin valuation.
Before we jump in, I always share how my portfolio is performing.
From the start of 2024 to month end August 2025, my portfolio is up 299.66%.
This year alone, I’m sitting on +115.77% YTD through August.
I want to be clear, I don’t expect these returns to continue. My goal is to average 30% annually, which means lower and potentially even negative years ahead.
With that said back to the article.
What Does Conmed Do?
Conmed Corporation is a global medical device company focused on tools that make surgery less invasive and more effective.
Its products show up in operating rooms across orthopedics, gastroenterology, gynecology, thoracic surgery, and general surgery.
The company was founded in 1970 in upstate New York as a small surgical equipment supplier. Over time, it leaned on acquisitions plus in-house R&D to expand its reach.
A turning point came in the 1990s when they bought Linvatec, giving it an early foothold in arthroscopy and sports medicine.
Another milestone was the 2019 acquisition of Buffalo Filter, which put it at the front of the surgical smoke evacuation market, a niche that exploded as robotic and minimally invasive procedures took off.
In 2020, management shifted incorporation to Delaware, modernizing its corporate structure and setting up for the next phase of growth.
Fast forward to today, and in 2024 the company pulled in about $1.3B in revenue, split between orthopedic surgery and general surgery:
Orthopedic Surgery (~42% of sales)
This side of the business is all about helping surgeons repair sports injuries and extremity problems.
Implants like BioBrace, Y-Knot anchors, and Argo knotless systems to repair soft tissue.
Tools such as powered resection instruments, visualization systems, and fluid management gear.
Extremity products including the Quantum Total Ankle System and CoLink plating for foot/ankle reconstruction.
Importantly, about 79% of this segment’s revenue comes from single-use disposables. Meaning predictable, recurring demand every time a surgeon steps into the OR.
General Surgery (~58% of sales)
This is where Conmed’s flagship products live. The AirSeal system provides valveless ports that make laparoscopic and robotic surgery cleaner, safer, and more efficient. Add in Buffalo Filter’s smoke evacuation devices, and Conmed controls one of the broadest portfolios in surgical plume management.
Beyond that, the company sells:
Electrosurgical tools (generators, handpieces, argon beam coagulators).
Endomechanical instruments (trocars, suction/irrigation, graspers, scissors).
Endoscopic products for GI and pulmonary procedures, covering dilation, hemostasis, stricture management, and monitoring.
Here too the model is sticky with over 92% of revenue comes from single-use products.
Roughly 45% of revenue comes from outside the U.S., with direct sales teams in Europe, Asia, and Latin America.
Why They Are Interesting
Down from Highs
Conmed is down over 70% from highs made in 2021 but curiously not because fundamentals have deteriorated.
Since 2021:
Revenue is up 30%
Free Cash Flow is up 50%
ROIC and ROCE are higher in the TTM than 2021
Share Count is down 5%
Currently trades at <10x FCF
So what is the issue? Obviously it is hard for me to know for certain but the selloff seems driven by sentiment, with some impact from slowing growth.
I will touch more on that growth later.
Improved Margins
From their lows in 2022 of barely positive FCF margins things have improved dramatically, though in the TTM have fallen slightly from the highs.
Typically I look for potential margin improvement, but here, margins have already rebounded with management forecasting peak earnings per share for 2025.
On top of the progress already made management also expects $20M in supply chain savings, meaningful against their TTM $150M FCF.
Industry Growth
Conmed benefits from some tailwinds both in general and orthopedic surgery.
Surgical equipment forecasts generally sat in the high single digit range.
Orthopedic market growth was lower usually in the low to mid single digit range.
Both of these markets are growing faster than GDP which will be a solid long term tailwind.
Fixing the Supply Chain
Conmed’s main issue has not been demand or product. It has been their supply chain. Management noted 7 of their suppliers suddenly closed their doors which caused issue getting the parts and materials they need.
These issues have been improving and recently they hired a consulting firm to help resolve, fortify, and streamline their sourcing which is expected into total to cut costs. And as this is resolved they even expect to win back the share they lost.
Risks and Questions
Recession
A recession could modestly pull back revenue as some quality of life procedures are delayed and insurance coverage declines due to layoffs.
These would lead to some softening of demand for Conmed however the majority of the products they provide are single use and used in necessary procedures. This means I would expect limited impact even in a recession though it would not be nothing.
Execution on Growth and Margins
For Conmed, execution will be critical in both reigniting growth and sustaining margins.
They don’t need double digit expansion. Steady mid to high single digit growth in line with the market would be enough to convince the market they are back.
Cost discipline will also play an important role, particularly around tariffs. If these costs are not managed effectively, free cash flow could come under pressure.
Much depends on the new CEO and his ability to deliver. More work is needed to fully assess his track record and whether he can guide Conmed through these challenges.
If they struggle to fix their issues this could lead to customers permanently replacing them with competitors products. It is crucial they get back up at full capacity in the coming year.
Alignment with Shareholders
More work needs done to understand upper management pay structure and determine how aligned they are with shareholders.
As Charlie said, “Show me the incentives and I’ll show you the outcome.”
Competition
Conmed faces stiff competition from many companies far larger than them. 3
If they do not continue to innovate they could lose market share.
As of today here are the puts and takes from my research.
Conmed has carved out defensible niches where its products are genuinely differentiated.
AirSeal, their advanced insufflation and smoke evacuation platform, and Buffalo Filter, their surgical smoke removal business, both generate high-margin recurring revenue. Hospitals need to keep buying disposables once the capital equipment is installed.
BioBrace, a biologic scaffold implant for soft tissue repair, is another unique product that larger peers don’t yet offer at scale. These products give Conned sticky revenue and clinical advantages that help it stand out in a crowded industry.
The company’s weakness is not demand but execution. In orthopedics Conmed has lost market share because supply chain problems left products backordered. That created openings for rivals like Stryker, Arthrex, and Smith & Nephew to capture cases.
Winning back the lost share may be difficult given competitor system integration, though Conmed’s offering may be good enough to win it back. It is difficult to know without more work.
This is the most important area where research is needed. If Conmed has a superior offering, which it seems they do. It puts them an an incredibly strong position to maintain the turnaround in their financials and give the market time to catch up.
Medicaid/Medicare Cuts
I have not yet looked into the effect cuts to public healthcare would have on the company so more work would be needed to confirm the potential impact.
Valuation
Please note this is NOT a company I own. This is an idea I thought worth sharing.
For any valuation I aim to keep it straight forward and common sense.
Starting with time frame Conmed could turn quickly, but broken stocks often take more time to rebuild. For that reason I’m looking out to 2028.
Next to revenue I am going to assume they hit their midpoint of $1,367M for 2025 followed by 6% growth per year out to 2028.
2028 full year revenues of $1.63B feel like a conservative base case assuming no acquisitions and only maintaining share.
Now to FCF margins I will assume only a small increase from today’s 11.2% to 12% from cost savings on their supply chain. This is still below even recent margins of 12.9%.
This gets us to 2028 FCF of $195M.
Now onto multiple. This is probably the most difficult area to forecast. Historically their average price to FCF has been around 20x. However that has been on lower margins and during periods where they have had less opportunity for growth.
In the past when their margins reached levels around 12% their multiple was closer to 10-12x. I am going to assume an increase from that level up to 16x driven by recently rising returns on capital and growth from themes like robotics and better innovation from the company.
This implies the following assuming no share count change.
2028 Market Cap: $3.12B
2028 Share Price: $101.05
This is more than a 2x return over the next 3.25 years or a ~27% CAGR from todays level of $46 per share.
This falls just below my benchmark but the company is a very interesting one I will keep my eye on.
What do you think of the company?
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https://market.us/report/surgical-equipment-market/
https://www.thebusinessresearchcompany.com/report/orthopedic-devices-global-market-report
Competitor Slides, Pgs 5,6. https://conmed.gcs-web.com/static-files/387761aa-d5dc-4c58-b6ab-c7f4dd8ef44c
Interesting Company, good overview, but I think there are better opportunities.
I think the sentiment overhang could be due to the following:
Execution / supply chain risk credibility: Investors may believe that “supply chain trouble” is not a transient noise but a structural weak spot. Repeated delivery issues, backorders, or missed guidance erode confidence. In Q2 2025, orthopedic sales grew only 0.8%, and management acknowledged loss of market share due to supply constraints. Even if revenue recovers, investors may demand proof (i.e. multiple quarters of stable order rates, backorder clearance) before re-multiple.
Growth deceleration / “good is not good enough: While growth has come, the rate is moderating. Markets tend to punish high-multiple names when growth slows, even if still positive. Revenue growth in Q2 2025 was ~3.1% yoy (vs. stronger growth in earlier years). Also, the 5-year historical growth is strong (~33.7% annual earnings growth), so the base becomes harder to beat. If future growth falls into the mid-single digits, the implied multiple must compress (unless margins or capital returns surprise).
Margin / cost pressures (tariffs, input inflation, FX): Even with supply chain fixes, the company is exposed to macro pressures (tariffs, inflation, commodity costs) which can eat into margin expansion. They estimate a ~$0.14 EPS hit in 2025 due to tariffs, especially given Chinese sourcing exposure. Margins may be “one surprise away” from contraction, especially if input inflation or foreign exchange moves adverse.
Leverage / balance sheet risk: Conmed carries nontrivial debt, and cash is limited. That raises the “fixed-cost burden” and exposure to interest or refinancing risk. From Q2 2025, debt stood ~$881 million, interest expense ~$6.4 million, leverage ~3.1× (as reported). In stress periods, debt servicing or covenant risk could force capital constraints or limit ability to invest.
Sentiment, multiple compression, “broken stock” discount: Once a stock is punished, rehypothecation of negative views can keep it depressed (i.e. the “fallen angel” effect). Even incremental misses or noise cause outsized multiple contraction. Market commentary frames CNMD as “underperformer despite resilient fundamentals as outlined in the article. Part of recovery will require not just better earnings, but narrative healing, consistent guidance, and risk de-rating.
One-time distortions / accounting noise: Investors might discount improvements if they perceive them as aided by one-offs, nonrecurring gains, or accounting adjustments. “CNMD has a large one-off gain of $23.7 M impacting its last 12 months”- The market may demand “clean, recurring” growth, not contingent gains.
Macro / sector headwinds / risk aversion: Healthcare / med-tech is not immune to broader risk-off rotations, rising interest rates, and capital re-allocation to “safer / higher-growth” bets. Also, regulatory risk or reimbursement risk always looms. Articles discussing Conmed note that sentiment in surgical / consumables sectors is cautious. Even if Conmed executes, a weak macro or risk-off environment could mute re-rating.
Other observations:
Earnings volatility / swings. Note that in 2022, Conmed reported a net loss of –$81M, vs positive net incomes in 2021 and 2024. That kind of volatility (especially negative swings) tends to breed discounting risk in capital markets.
Backlog / order visibility. If backorders persist, or if distributors/hospitals delay orders, the forward pipeline can look shaky even if trailing metrics are okay.
Competition & market dynamics. As you pointed out, Conmed competes with huge players (Stryker, Smith & Nephew, Arthrex, others) who have deep distribution, capital heft, and ability to bundle. If Conmed loses cases due to stock-outs or compatibility, regaining share may be tough.
Regulation / reimbursement / healthcare policy risk. Any change in Medicare/Medicaid reimbursement, device regulation, or hospital capital budgeting could disproportionately harm smaller med-techs like Conmed.
Perception of growth “ceiling.” The market may view Conmed as a “mature niche player” rather than a high-growth disruptor, limiting willingness to pay premium multiples.
I think there are a lot of things that need to align for this stock to re-rate.
Great find and analysis. The CEO change in Jan 2025 could be the fresh blood needed to fix whatever problems that has driven the stock down. More analysis needed but overall great find to dig into!