Medical device company Penumbra (NYSE:PEN) reported Q1 CY2025 results beating Wall Street’s revenue expectations , with sales up 16.3% year on year to $324.1 million. The company expects the full year’s revenue to be around $1.35 billion, close to analysts’ estimates. Its non-GAAP profit of $0.83 per share was 24.4% above analysts’ consensus estimates.
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE:PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Medical Devices & Supplies - Cardiology, Neurology, Vascular
The medical devices and supplies industry, particularly in the fields of cardiology, neurology, and vascular care, benefits from a business model that balances innovation with relatively predictable revenue streams. These companies focus on developing life-saving devices such as stents, pacemakers, neurostimulation implants, and vascular access tools, which address critical and often chronic conditions. The recurring need for these devices, coupled with growing global demand for advanced treatments, provides stability and opportunities for long-term growth. However, the industry faces hurdles such as high research and development costs, rigorous regulatory approval processes, and reliance on reimbursement from healthcare systems, which can exert downward pressure on pricing. Looking ahead, the industry is positioned to benefit from tailwinds such as aging populations (which tend to have higher rates of disease) and technological advancements like minimally invasive procedures and connected devices that improve patient monitoring and outcomes. Innovations in robotic-assisted surgery and AI-driven diagnostics are also expected to accelerate adoption and expand treatment capabilities. However, potential headwinds include pricing pressures stemming from value-based care models and continued complexity changing from navigating regulatory frameworks that may prioritize further lowering healthcare costs.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Penumbra’s sales grew at an impressive 17.4% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Penumbra’s annualized revenue growth of 18.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 18.5% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Penumbra has properly hedged its foreign currency exposure.
This quarter, Penumbra reported year-on-year revenue growth of 16.3%, and its $324.1 million of revenue exceeded Wall Street’s estimates by 2.7%.
Looking ahead, sell-side analysts expect revenue to grow 12.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and indicates the market is baking in success for its products and services.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI.
Click here to access our free report one of our favorites growth stories
.
Operating Margin
Penumbra was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.8% was weak for a healthcare business.
On the plus side, Penumbra’s operating margin rose by 7.4 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its past improvements as the company’s margin was relatively unchanged on two-year basis.
This quarter, Penumbra generated an operating profit margin of 12.4%, up 8.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Penumbra’s EPS grew at an astounding 34.5% compounded annual growth rate over the last five years, higher than its 17.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Penumbra’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Penumbra’s operating margin expanded by 7.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q1, Penumbra reported EPS at $0.83, up from $0.41 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Penumbra’s full-year EPS of $3.29 to grow 21.7%.
Key Takeaways from Penumbra’s Q1 Results
We were impressed by how significantly Penumbra blew past analysts’ constant currency revenue expectations this quarter. We were also glad its EPS and EBITDA outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 5.4% to $293.55 immediately following the results.
Penumbra had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.
We cover that in our actionable full research report which you can read here, it’s free
.
