Koji Bratcher
7 min readJul 29, 2021

Surgical instrument and device companies experienced a significant but short-lived downturn during the height of the pandemic. Healthcare providers postponed or canceled non-urgent surgeries as hospitals prioritized emergencies amid a COVID-driven overload on the global healthcare system. However, surgical volume rebounded quickly toward the end of 2020 and into 2021. A continuing backlog of procedures promises continued growth in surgery activity. Valuations of surgical instrument and device companies have continued to move upward as the industry recovers. 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 31, 2020 analysis and was first posted to the ValuInsights blog. Follow me on LinkedIn for more industry insights!

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 June 30, 2021.

Figure 1 summarizes the surgical instruments and device companies’ median enterprise value (“TEV”), median revenues, and median earnings before interest, taxes, depreciation, and amortization (“EBITDA”). The latest fiscal year is notated “LFY” (2020), while the latest 12 months is labeled “LTM” (latest available information as of June 30, 2021).

Figure 1 illustrates the remarkable hike in industry enterprise values over the last five fiscal years and the LTM. Until 2019 (LFY-1), the rise in valuations for the surgical instrument and device companies coincided with improvements in their financial performance.

Intuitively, the observed improvement in the financial metrics through LFY-1 (2019) was partially due to continuing demand for surgical instruments amid an aging U.S. population, increased average lifespans, and improved access to healthcare (especially internationally). These factors have helped to drive up valuations as well.

Significant merger and acquisition activity in the industry has also driven increases in financial performance and valuations. More prominent players in the industry have absorbed their smaller counterparts to add new and complementary products to their portfolios. Acquisitions offer these companies an avenue to innovation without incurring the costs and uncertainties of developing such products in-house. By leveraging their size, expertise, and market presence, the publicly-traded companies in the industry can scale the acquired businesses to rapidly generate favorable returns.

In 2020, the industry suffered from reduced surgery activity. Despite minimal improvement in revenue and EBITDA, market values continued to rise through the first six months of 2021.

Valuation Multiples

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

Based on Figures 2 and 3, the median multiples increased in the latest two periods analyzed (i.e., 2020 and LTM 2021). This makes sense given the continued increase in valuations amid stagnant revenue and EBITDA growth.

The Growth Story

Growth often has a strong influence on how companies are valued. A summary of the consensus forecasts for each group is presented in Figures 4 and 5 below (note that “NFY” means next fiscal year; NFY = calendar 2020 for most companies).

In Figures 4 and 5, the orange line represents data as of June 30, 2020 — during some of the worst months of the pandemic. At the time, projections for the industry suggested a sharp decline in revenue and EBITDA in 2020. Expectations for 2021 and 2022 indicated a robust post-pandemic recovery.

The blue line in Figures 4 and 5 represents information as of June 30, 2021. Ultimately, revenue and EBITDA did not decline as sharply as was expected in 2020. Analysts anticipate growth for the publicly-traded surgical instrument device companies in 2021 and 2022 to exceed prior expectations.

We also 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 this case, however, we were not able to discern a meaningful trend between growth and multiples.

The lack of an observed relationship suggests that there are likely multiple factors (in addition to growth) impacting the magnitude of valuation multiples. There are uncertainties facing the industry related to when the global healthcare systems will address the backlog of non-emergency surgeries and whether a resurgence of COVID cases due to variants will limit future surgical activity. These factors may influence how investors weigh projected growth rates in determining company 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.

In this case, I did not observe a discernable relationship between size and valuation multiples. While this is not to say that investors are entirely ignoring size, it appears to be overshadowed by other factors as of June 30, 2021.

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 true for the publicly-traded surgical instrument and device companies, as seen in Figure 6 below.

While there is limited consistency among the observed data points, companies with projected EBITDA margins of less than 25% appear to trade at revenue multiples ranging from 2.5x to 6.0x. Companies with EBITDA margins greater than 25% seem to trade at valuation multiples of 7.0x and as high as 14.5x. Again, the lack of consistency throughout the dataset suggests that investors are considering a multitude of factors in their valuations of companies in this industry.

Tying it All Together

The trends observed in this article suggest that investors are considering multiple factors and that no single consideration is measurably impacting valuations. A summary of the observations in this article are presented below and compared to our analysis as of December 31, 2020.

For many companies in the industry, the pandemic presented a temporary setback and their improving valuations reflect positive investor sentiment. Continued improvements in life expectancy and lower mortality rates are likely to drive additional growth in the industry. In addition, the backlog of non-emergency surgeries are likely to drive demand for surgical instruments and devices higher as we continue to settle into a post-pandemic recovery.

Consistent with the observations above, analyst forecasts indicate a general expectation for the industry to continue to grow over the next few years. Uncertainties exist around growth, however, as COVID-19 variants threaten to cause a resurgence in infection rates and, possibly, once again threaten future surgical activity.

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.


Medical device companies are complex organizations with numerous value drivers. Business valuations require an understanding of the industry and a proper interpretation of capital market evidence. If you need guidance in your valuation requirements from an experienced appraiser, Helios Consulting, Inc. is here to help.

Don’t need a full valuation but looking for a high-level assessment of how your company compares to its publicly-traded peers? ValuAnalytics, LLC provides cost-effective, expert-level valuation analytics to give you the insight you need to make better internal decisions around valuation.

For more information, please visit us at:



Koji Bratcher

Director/Principal @ Helios Consulting, Inc. ( and Founder of ValuAnalytics, LLC (