Numbers

The Numbers

RadNet trades where it does because the market has stopped treating it like a capital-intensive outpatient imaging roll-up and started paying for its Digital Health/AI layer. EV/EBITDA rerated from ~9x to ~20x in two years, even as real earnings power barely moved and stock-based compensation began eating two-thirds of reported free cash flow. The single metric most likely to rerate or derate the stock from here is EV/EBITDA vs its own 20-year history — today's 14-15x sits at roughly +1.3 standard deviations above the long-run mean and is the reason patience, not multiple expansion, is the working thesis.

Snapshot

Quality Score blends profitability, growth, balance-sheet, and momentum sub-scores into a single 0–100 read. Fair Value is a long-run intrinsic estimate based on the company's own earnings history; the 12-month Fair Value target is $74.87, +32.6% from today.

Is This a Durable Business?

The scorecard is split. Growth and momentum are strong; Altman Z and Piotroski are not. Predictability of 1 out of 5 is the single most important disclaimer on every chart that follows — this is not Ensign Group–like consistency. It is a lumpy, acquisitive operator in the middle of a platform shift.

Revenue & Earnings Power — 20 Years

Revenue 13x since 2006 through a mix of organic volume growth and acquisitions. But operating margin has been trapped in a 3-8% band for two decades and spent FY2025 at the lower end. This is the defining economic characteristic of the business: scale compounds, margins do not.

Quarterly Trajectory

A repeating seasonal pattern: first quarters hurt — patient volume is lighter after the holidays and fixed cost absorption drops. The 1Q25 spike to negative operating margin is exaggerated by a one-time refinancing charge; operating margin recovered immediately in the following three quarters. Underlying revenue growth continues to accelerate — 4Q25 revenue grew 14.8% year-on-year, the fastest quarterly print in recent years.

Segment Mix — Where the Rerate Lives

Digital Health (AI mammography, prostate screening, teleradiology) is still 4.5% of revenue but grew 41% year-on-year and is the asset the market is paying 14-15x EV/EBITDA for. The imaging centers grew 10.9% — healthy for a mature outpatient footprint, but not a multiple-rerating number on its own.

Cash Generation — Are the Earnings Real?

The two series barely look like they belong on the same chart. Operating cash flow set a record at $298.8M in FY2025; reported net income was negative. This gap is structural — $212M of depreciation and amortization and a further $55M of stock-based compensation sit between OCF and GAAP net income every year. The earnings quality question is not whether cash is real. It is whether the reader should believe operating cash flow before or after backing out stock comp.

Free Cash Flow — Adjusted and Honest

Capex as a share of revenue has stepped up from 6-7% pre-COVID to a steady 10-11% since 2021. That is the cost of running AI-enabled imaging centers — newer scanners, more software, more digital build-out — and it is the reason FCF conversion is unlikely to improve materially without a deliberate capex slowdown.

Capital Allocation — Where the Money Went

Capital priorities are clear: grow by acquisition and pay employees in stock. Zero buybacks in a decade, zero dividends ever. In FY2025 RDNT also raised $99M of new debt and issued $0 of new stock (after $218M in 2024 and $246M in 2023 — the balance-sheet repair was funded by shareholders, not cash flow).

Balance Sheet — Repaired, Not Rock-Solid

Net leverage fell from 5.0x to 1.0x in a decade, one of the most useful things management has done for equity holders. But interest coverage is only 1.5x — this is still a capital structure that leans on refinancing windows. The 2024 equity raise and 2024 debt refinancing are what unlocked the recent rerate; without them the stock does not trade at 20x EBITDA.

Valuation — Now vs Its Own 20-Year History

This is the most important chart on the page. RDNT spent 18 of the last 20 years trading in a 5-10x EV/EBITDA band. In 2024 and 2025 it decoupled, running all the way to 22x on year-end prices. At the current share price of $56.44 the multiple is back to roughly 14.5x — still 1.3 standard deviations above the 20-year mean, but halfway toward normalization. The rerate is real; the premium is also real.

Peer Comparison

RDNT trades at the growth-stock end of the peer set — EV/EBITDA of 14.5x sits between Tenet's 7.2x (larger, more profitable, more leveraged) and Ensign's 20.7x (higher quality, consistent compounder). The gap that matters: RDNT's operating margin of 4% is less than half of THC's 16% and DVA's 15% — the multiple is betting on margin expansion from the Digital Health mix, not evidence of it yet.

Visually, RDNT is the anomaly: similar Quality Score as THC (84-85), but double the EV/EBITDA. Ensign earns its 20x multiple with a 97 Quality Score and 4.5-star predictability. RDNT's 1-star predictability is the risk the bubble doesn't show.

Fair Value

Four of five reasonable anchor points cluster between $64 and $95. The bear case — reversion to the pre-AI 8-10x EV/EBITDA band — implies roughly a third of downside and is the scenario a patient buyer should respect if Digital Health growth stalls. The base case assumes multiple stays elevated but near today's level, with modest EBITDA growth carrying the price forward.

What to Hold Onto

The numbers confirm two things the popular story gets right: revenue acceleration is real (14-15% in the latest quarters) and the balance sheet is in its best shape in a decade (net leverage from 5x to 1x). The numbers contradict the idea that this is a clean AI software platform — 96% of revenue still comes from physical imaging centers, operating margin is stuck at 4-6%, and stock-based comp now consumes two-thirds of reported free cash flow. The one metric to watch next: Digital Health segment growth. If it keeps a 40%+ pace and breaks past 10% of group revenue, the multiple is defensible. If it slips below 25%, EV/EBITDA will compress back toward 10x and the stock with it.