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2 Reasons MMSI is Risky and 1 Stock to Buy Instead

By: StockStory

September 18, 2025 at 00:02 AM EDT

MMSI Cover Image

Over the past six months, Merit Medical Systems’s stock price fell to $83.35. Shareholders have lost 16.6% of their capital, which is disappointing considering the S&P 500 has climbed by 17.5%. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Merit Medical Systems, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Merit Medical Systems Not Exciting?

Even though the stock has become cheaper, we don't have much confidence in Merit Medical Systems. Here are two reasons why MMSI doesn't excite us and a stock we'd rather own.

1. Fewer Distribution Channels Limit its Ceiling

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $1.43 billion in revenue over the past 12 months, Merit Medical Systems is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

2. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Merit Medical Systems historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.5%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

Merit Medical Systems Trailing 12-Month Return On Invested Capital

Final Judgment

Merit Medical Systems’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 24× forward P/E (or $83.35 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the most dominant software business in the world.

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