Numbers

The Numbers

Convatec trades like a chronic-care medtech turnaround that has started to work, not a fully proven compounder: FY2025 revenue was $2.44B, adjusted operating margin reached 22.3%, and free cash flow conversion is excellent, but reported ROIC is only 7.6% and standardized leverage moved back toward 2.6x net debt / EBITDA after the $300m buyback. The single number most likely to rerate or derate the stock is whether management can convert the new 6-8% organic growth target into 24-26% adjusted operating margin while absorbing the 2026 InnovaMatrix reimbursement headwind; at 14.5x EV/EBITDA, the stock is roughly in line with its listed history, so the market is paying for execution rather than a statistically cheap multiple.

Snapshot

The available dataset did not populate numerical Quality Score or Fair Value fields for this run, so the page uses the available component ratios and a scenario range rather than pretending those headline outputs exist. Operating figures are in USD; the LSE share quote is shown in GBp because that is how the local price file is quoted.

What Is This Business Economically?

Convatec is balanced across four chronic-care categories, with no single segment above one-third of revenue. Infusion Care was the standout grower in FY2025, while InnovaMatrix was only 3% of revenue but created most of the near-term reimbursement noise.

Revenue & Earnings Power - 2013-2025

Revenue has compounded steadily since FY2013, but reported operating income still shows the accounting drag from amortization and the FY2025 InnovaMatrix impairment. The important inflection is not GAAP margin alone: adjusted operating margin rose from 17.7% in FY2021 to 22.3% in FY2025, which is what the market is underwriting.

Recent growth is not a collapse story: the last two reported quarters grew about 7% year over year despite the InnovaMatrix drag. The caveat is that the quarterly source appears to repeat half-year values across paired quarters, so use this as a direction check rather than a precise seasonality read.

Cash Generation - Are The Earnings Real?

Trailing five-year FCF / net income is 177%, well above 120%, because reported earnings are held down by amortization and noncash charges while capex remains moderate at 5.5% of FY2025 revenue. That is a quality positive, but it also means reported P/E can look expensive even when cash conversion is healthy.

Capital Allocation

The allocation record is mostly reinvestment, dividends and bolt-on M&A, but FY2025 was different: the $300m buyback was larger than the dividend and pushed standardized leverage back up. That can be reasonable if growth accelerates, but it reduces the margin for error if reimbursement pressure lingers.

Balance Sheet Health

Convatec is financeable, not fortress-like. Standardized net debt / EBITDA rose to 2.6x in FY2025, while management adjusted leverage was 2.0x; the gap matters because intangibles, amortization and acquisition accounting are central to this balance sheet.

Is This A Well-Run Business That Will Still Be Around In 10 Years?

What this tells you: Convatec has enough cash generation and category durability to survive and compound, but the balance sheet is not a free option after the 2025 buyback. The unpopulated headline score fields and sub-ranks mean the right read is quality-by-components: cash conversion is strong, leverage is manageable, and returns still need to improve.

Valuation - The Critical Chart

Current EV/EBITDA is 14.5x versus a five-year mean of 14.8x and available listed-history mean of 15.8x; that is -0.4 standard deviations from history, so this is not a screaming multiple anomaly. The stock is priced as a credible improving medtech asset, not as a busted turnaround.

The missing fair-value field is important: the valuation conclusion here comes from multiple history, cash flow and peers, not a single point estimate. P/E remains optically high because reported earnings include amortization and impairment noise; EV/EBITDA and FCF yield are more useful for this business.

Peer Comparison

Convatec earns a higher multiple than messy broad medtech turnarounds because its chronic-care revenue is steadier and cash conversion is better, but it does not yet have the return profile to deserve a clear premium to the strongest scaled peers.

Fair Value Range

The narrow base case is a multiple-reversion view, not a heroic DCF: at roughly the current 14.5x EV/EBITDA, fair value is close to the latest valuation share price, while a move to 16.0x creates low-teens upside and a slip to 12.0x creates about 20% downside. External analyst targets are higher, but the internal history does not demand that optimism by itself.

The numbers confirm that Convatec is a real cash-generative chronic-care platform with broad category exposure, improving adjusted margin and strong FCF conversion. They contradict the easy version of the turnaround story: the market is not pricing this like a broken asset, and the 2025 buyback increased financial sensitivity just as reimbursement risk hit InnovaMatrix. Watch FY2026 organic growth excluding InnovaMatrix, adjusted margin progress toward 24-26%, and whether net debt / EBITDA moves back toward 2x; those three would change the thesis fastest.