Is Now the Time to Buy Inspire Medical Systems Stock?

Inspire Medical Systems’ stock just had a banner day, jumping on news that seems pretty significant. But does yesterday’s surge make this a buy, or are we just catching a falling knife? Remember, INSP stock is still down 38% YTD. Also, see – Marvell Stock: Overlooked AI Winner?

Two things happened that got investors excited. First, Stifel analyst Jonathan Block upgraded the stock from “Hold” to “Buy” with a $110 price target. Second—and this is the bigger deal—Medicare announced it’s boosting reimbursement rates for Inspire’s V implant by roughly 50% starting in 2026. That’s a massive tailwind for a medical device company.

The timing matters here. INSP has been beaten down this year, struggling with the rollout of its V system. So this Medicare news feels like a potential inflection point.

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But Wait—Where Does That Leave the Valuation?

Here’s where it gets tricky. Even after the struggles, INSP is trading at around $115 with some eye-watering multiples. The price-to-earnings ratio sits at 77.2—more than three times the S&P 500’s 23.0. The price-to-free cash flow? 34.8 versus 20.2 for the broader market.

Is that justified? Well, the growth story is certainly there. Revenue has grown at 37.7% annually over the last three years. Last quarter saw 10.5% growth year-over-year. For a company in the medical device space, that’s impressive. But here’s the tension: you’re paying premium prices for growth while the company is barely profitable.

Can They Actually Make Money on This Growth?

This is the uncomfortable question. Inspire’s operating margin is just 4.2%—far below the S&P 500’s 18.8%. Net income margin? An anemic 5.0%.

Think about what that Medicare reimbursement increase could mean, though. If hospitals and surgical centers are getting paid 50% more for these procedures, that should drive higher volumes. More procedures mean better operating leverage, which could finally help those margins expand.

The company isn’t burning cash—operating cash flow margin is a respectable 15.1%. But they’re clearly investing heavily for growth at the expense of near-term profitability.

What About the Balance Sheet?

Here’s some good news: Inspire’s financial position is rock solid. The debt-to-equity ratio is essentially nothing at 0.9%, and they’re sitting on $323 million in cash against just $33 million in debt. With a $3.5 billion market cap, they have plenty of runway to keep investing in growth without financial stress. So if we hit a rough patch, they’re not at risk of a balance sheet crisis.

How Does It Handle Market Turbulence?

Not great, honestly. During the 2022 inflation shock, INSP cratered 61.6% compared to the S&P 500’s 25.4% decline. And here’s the kicker—it still hasn’t recovered to those 2023 highs of $326. The stock peaked at $251 in May 2024 and is now trading around $115. See our dashboard – Can Inspire Medical Systems Stock Hold Up When Markets Turn? – for more details.

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So What’s the Verdict?

Inspire is a fascinating case of competing narratives. On one hand, you have strong growth, a strong balance sheet, and now a potentially game-changing Medicare reimbursement boost. On the other hand, you’re paying growth stock multiples for a company with weak profitability and high volatility.

The Medicare news is legitimately significant—a 50% reimbursement increase could be the catalyst that helps margins inflect upward. If that happens, the current valuation might look reasonable in hindsight.

But if you’re buying today at $115, you’re making a bet that this Medicare tailwind drives both volume growth and margin expansion. You’re also accepting that if the market turns south, this stock could drop harder than most. For aggressive growth investors willing to stomach volatility, the setup is intriguing. For everyone else, you might want to see evidence that the Medicare boost is actually translating to better financial performance before jumping in.

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