$547M in net cash. $8M in debt. 79% gross margins. And the entire company trades for $896M.
u/solacelabx ·
Reddit — r/ValueInvesting
· April 26, 2026 at 15:34
· ⬆ 38 pts
· 💬 20 comments
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Summary
The post analyzes InMode (INMD), a medical device company with a razor-and-blade model, arguing the market has oversold the stock due to cyclical headwinds and GLP-1 fears.
Author’s thesis: after subtracting $547M net cash, the operating business trades at ~5x owner earnings ($73M), with 79% gross margins and aggressive buybacks; intrinsic value estimated at $20.23 vs $14.14 current price.
Quality assessment: well-researched deep dive with detailed financials, risks, and valuation framework; not speculation but a fundamental value investing case.
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**TL;DR:** InMode (INMD) has $547M in net cash against a $896M market cap. Strip that out and you're paying ~$349M for a business generating $73M in owner earnings — roughly 5x. Gross margins are 79%, debt is near zero, and management bought back $127M of stock this year. The Ozempic fear is overblown. IV estimate: $20.23 vs. $14.14 current price (~30% margin of safety). Verdict: BUY.
I also made a full video deep dive on this one if you prefer that format: https://youtu.be/_C1Y4yAoKzg
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**What they do** — InMode designs radio-frequency platforms for minimally invasive fat reduction, skin tightening, and body contouring. Classic razor-and-blade model: sell $100K+ platforms to doctors (the razors), then collect recurring revenue on single-use consumable tips for every procedure (the blades). They outsource all manufacturing — virtually zero physical capital required.
**Why the stock got cut in half** — Two headwinds hit at once. High interest rates froze equipment leasing, so doctors stopped buying new platforms. At the same time, inflation-squeezed consumers delayed elective cosmetic procedures. Revenue shrank, and Wall Street panicked.
Then Ozempic entered the narrative. The market decided GLP-1 weight-loss drugs would destroy demand for fat reduction procedures entirely. The stock went from $40+ to under $15.
**Why I think the panic is wrong** — Rapid drug-induced weight loss creates a massive secondary problem: loose, sagging skin. InMode's flagship platforms are specifically designed for minimally invasive skin tightening. The GLP-1 wave may actually be *expanding* their addressable market. Meanwhile, interest rates and consumer caution are cyclical weather, not permanent climate change. The proof: despite a multi-year revenue decline, gross margins haven't budged from 79%. Their pricing power is fully intact.
**The real money (Owner Earnings):**
| | |
|---|---|
| Operating Cash Flow | $85.26M |
| Less: Stock-Based Comp | -$11.13M |
| Less: Maintenance CapEx (5yr avg) | -$0.87M |
| **Normalized Owner Earnings** | **$73.26M** |
| OE Per Share (63.36M diluted) | $1.16 |
CapEx is laughably small because they don't own factories. I ignore GAAP working capital changes to keep the estimate conservative.
**The balance sheet — this is where it gets absurd:**
| | |
|---|---|
| Liquid Net Cash | $547.10M |
| Total Debt | $8.23M |
| Net Cash Per Share | $8.63 |
| Market Cap | $896M |
| **Enterprise Value** | **~$349M** |
| **EV / Owner Earnings** | **~5x** |
Read that again. You're paying 5x owner earnings for the actual business. The rest of the market cap is cash sitting in the bank. At these prices, over 60% of what you're paying is backed by liquid cash.
**Capital allocation** — Management is doing exactly what you'd want an owner-operator to do with a cheap stock. They bought back $127.44M of shares in 2025 and just authorized another program to retire 10% of outstanding shares. Every buyback at these prices increases our per-share ownership of future cash flows.
**Valuation:**
| | |
|---|---|
| OE Per Share | $1.16 |
| Conservative Multiple | 10x |
| Business Value | $11.60 |
| Net Cash Per Share | $8.63 |
| **Intrinsic Value** | **$20.23** |
| Current Price | $14.14 |
| **Margin of Safety** | **~30%** |
I'm using 10x because the business is cyclically shrinking. A 10% earnings yield is satisfactory even if they never grow again. 5-year OE CAGR is 5.87%, and ROIC sits at 13.43% (depressed by the trough — it was much higher pre-2023).
**The #1 risk that would make me sell** — The innovation treadmill. InMode has to keep releasing new platforms to stay relevant with doctors. If a competitor launches a clearly superior device and InMode fails to respond, the razor-and-blade flywheel breaks. I'm watching their R&D pipeline closely. The GLP-1 and macro risks I consider overblown and temporary respectively.
**The four questions I always ask:**
1. **Do I understand it?** Yes — razor-and-blade medical device sales to doctors.
2. **Are the economics durable?** Yes — 79% margins held through a severe downturn on an asset-light frame.
3. **Is management honest?** Yes — aggressive buybacks, no empire-building acquisitions, near-zero debt.
4. **Is the price attractive?** Yes — 5x EV/OE with a cash floor covering 60% of the market cap.
**Verdict: BUY.** This is a classic cigar butt with plenty of puffs left. The market is pricing a temporary cyclical trough as permanent decline, while ignoring a cash fortress that de-risks the entire investment.
**Disclosure:** I hold a position in INMD. This is not financial advice — do your own research.
$547M net cash vs $896M market cap creates an enterprise value of $349M, or 5x normalized owner earnings of $73M. The market is pricing a cyclical trough as permanent, ignoring the cash cushion and management’s buyback program (10% authorization), providing a 30% margin of safety. A classic cigar butt with strong financial resources; high probability of re-rating as headwinds reverse. Innovation treadmill – if competitor launches superior device, razor-and-blade model breaks; also continued macro weakness could delay recovery.