Electromed, Inc. ELMD

Electromed, Inc. (ELMD) — deep-value analysis

Analysis date: 2026-09-04 · Reference price: … (close 2026-09-03) · Exchange: NYSE American Market cap: … mn (8,366,163 shares) · Net cash: … mn · Enterprise value: … mn Fiscal year: July 1 – June 30. FY2026 = year ended 06/30/2026, reported in the 10-K filed 08/25/2026.

Primary sources: 10-K FY2022–FY2026 and 10-Q FY2026 from SEC-Filings\ELMD\; data pack data-pack-ELMD-20260904.md (XBRL companyfacts + yfinance); DEF 14A filed 09/30/2025; Form 4 from 09/03/2026; the Q4 FY2026 earnings call transcript (08/25/2026, 5:00 PM ET); Monte Carlo simulation mc-ELMD-20260904.json.

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Executive summary (1 page: thesis, estimated value, verdict)

Electromed sells a single product — SmartVest, a high-frequency chest wall oscillation (HFCWO) vest for patients with bronchiectasis, cystic fibrosis and neuromuscular disease — directly to the patient, bypassing home medical equipment distributors, and collects from insurers. The model is unusually profitable: gross margin 78.5%, operating margin …%, ROE 23.3%, zero debt, … mn cash. In FY2026 revenue grew 15.3% to … mn, operating profit 43.7% to … mn, and net income …% to … mn (…/diluted share). The 15th consecutive quarter of revenue and profit growth. It is, without question, a good business.

The market decided otherwise. On August 25 the stock closed at …; on August 26, after the results and the CEO's announced retirement, it fell 19.2% to … and over the following five sessions lost another 13%, to … Over seven sessions, …. RSI14 = 16.9 — extreme oversold. A P/E of … is the five-year low on the monthly series (median 35.3; P25 = 29.2; P10 = 25.8). On the surface, exactly the deep-value pattern: unchanged business, collapsed price.

My thesis is that the collapse corrected an overvaluation, not created an opportunity. Three observations support it.

First: profit isn't converting to cash in the proportion the income statement suggests. In FY2026 net income was … mn, and free cash flow … mn — a 74% conversion, down from 147% in FY2025 and 169% in FY2024. The cause isn't accounting, it's structural: 95% of homecare revenue comes from capped installment contracts, collected from insurers over roughly 13 months. Receivables grew 20.9% (to … mn) against revenue …, and net working capital absorbed … mn in a single year. With 40.4% of annual revenue permanently locked in receivables, every additional dollar of revenue costs roughly 33 cents of tied-up cash. At … the FCF yield on enterprise value is 4.0%, not the 4.7% EPS would suggest.

Second: the …% net income growth is, normalized, roughly 26%. FY2025 contained … thousand of patent impairment and … thousand of CEO PSU expense (both non-recurring in FY2026), and the effective tax rate fell from 26.7% to 21.3% thanks to R&D credits. Adjusted for the … thousand of non-recurring items in the FY2025 base and normalized to a 24% rate, profit grows …%, not …%. Excellent — but not miraculous, and not enough for the pre-collapse multiples.

Third: management's own arithmetic caps FY2027 growth at roughly 10%. Operational guidance is explicit: 67 territories filled (versus an average of 58 reps in FY2026) and homecare revenue per rep of …–1.15 mn, versus … mn realized. At the midpoint of the range and roughly 65 reps on average, homecare reaches ~… mn (…); at the top of the range, ~… mn (…). With the rest of the business (… mn, growing ~7%), total FY2027 revenue comes out between … and … mn, i.e. … to …. "Double-digit growth" is the optimistic end of the company's own guidance, not its center.

Estimated value. Five triangulated models give a range of …–…/share, with the median at … Monte Carlo over 20,000 scenarios (OE … mn, g1 12%, r …%, gt 2.5%) gives a median intrinsic value of … with a …% probability the stock is undervalued and a …% probability of a margin of safety above 30%. The no-growth earning power value (EPV Greenwald) is … — in other words, at … you're paying … nearly half the price, for growth that hasn't happened yet.

Verdict: DO NOT BUY at … Watch list with a trigger at … Below … the base model offers ~11% margin of safety, the sustained-operating-leverage model ~37%, and EPV becomes a reasonable defensive floor. The company deserves serious watching: no fraud found, no debt found, no net dilution found, and the business is real. The price simply still assumes ten more years of flawless execution from a team whose leader is leaving in April 2027, with no successor named.

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