PROCEPT BioRobotics (PRCT) Faces Class Actions, Is The 18% Undervalued View Still Credible?
Multiple law firms have launched securities class actions against PROCEPT BioRobotics (PRCT), accusing the medical robotics company of using undisclosed discount programs that inflated reported U.S. handpiece sales, revenue figures, and inventories.
For PROCEPT BioRobotics, the legal headlines arrive after a clear loss of momentum, with the share price down 25.1% over 90 days and 32.6% year to date, contributing to a 44.7% decline in 1 year total shareholder return and signalling that investors are reassessing both growth prospects and legal risk at the current US$20.74 level.
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The legal overhang and a share price that has fallen hard have reset expectations around PROCEPT BioRobotics. At roughly US$20.74, investors may question whether the balance of risk and potential reward still justifies committing new capital.
Most Popular Narrative: 17.9% Undervalued
On the most followed narrative, PROCEPT BioRobotics screens as undervalued, with a fair value of $25.26 versus the recent $20.74 share price, which creates a clear gap investors are trying to explain.
I have been an investor in PRCT since before IPO. The wild fluctuations in share price recently make no sense. The sell side analyst who chased the share price up to highs in 2024 (when the price was way too frothy) are doing the same thing now by revising the share price lower and lower, when clearly the company is still doing a great job. The recent downgrade by Leerink, citing PAE as a possible headwind for PRCT growth, is in direct opposition to what Larry Wood (CEO) stated at the last earnings call. To quote Larry Wood, “I don’t think PAE is a headwind for us at all. I think PAE is a big red herring. It’s a procedure that really does not get performed in any volume in Europe. And the reason it doesn’t get performed is because it doesn’t get paid for because it’s not a very good procedure.” So if you believe Larry Wood, then the company has been grossly oversold and looks very very cheap down here. If PRCT hit the Q2 numbers watch all the sheep suddenly revise their target prices back up again. I think fair value is still up at $47. PRCT had a reassessment of how to report handpiece sales versus procedures and therefore there was a shortfall on revenue. Clearly they could have stuck with the old model and revenue would have been better. Larry is doing a great job of making reporting a direct reflection of procedures being done. If the numbers are delivered, watch this thing fly.
The narrative leans on strong revenue expansion assumptions, a future margin profile that looks more like a scaled medical devices leader, and a valuation multiple that depends on those targets being hit. Want to see exactly how those ingredients combine to arrive at that $25.26 fair value and a projected profitability path that stretches beyond today’s losses.
Result: Fair Value of $25.26 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
Still, the legal overhang and ongoing losses, with net income at a loss of US$109.76 million on US$337.34 million of revenue, could quickly puncture the undervalued story.
Find out about the key risks to this PROCEPT BioRobotics narrative.
Another View On PROCEPT BioRobotics Valuation
The crowd favourite story paints PROCEPT BioRobotics as 17.9% undervalued at $25.26 fair value, yet the SWS fair ratio tells a different story. The P/S ratio sits at 3.5x, above both the 3.3x fair ratio and the 3x Medical Equipment industry average. This suggests less of a clear bargain and more valuation risk if expectations slip.
For investors weighing that gap between narrative and numbers, it raises a blunt question: Is this price rewarding long term potential, or just paying up for hope in a business that is still loss making?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
Sentiment around PROCEPT BioRobotics is clearly split, so move quickly, review both sides of the story, and weigh the 1 key reward and 1 important warning sign.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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