Executive Summary

Medacta Group SA is a high-quality, family-controlled Swiss orthopedic device company with a differentiated business model built around proprietary surgical techniques (AMIS), surgeon education (M.O.R.E. Institute), and a vertically integrated manufacturing platform. The company is growing significantly faster than the orthopedic market (16-19% cc vs. 4-5% industry), taking share from incumbents through surgeon conversion and geographic expansion, particularly in the US.

Investment Thesis in 3 Sentences: Medacta is a rare mid-cap orthopedic company combining founder-family ownership (70% Siccardi family), high switching costs from surgeon training in proprietary techniques, and a long runway for US market penetration (currently ~30% of revenue vs. 41% of global joint market). The business generates attractive returns (ROE ~19%, EBITDA margins ~28%) with a clean balance sheet (net debt/EBITDA <1x). However, at CHF 150.60 (P/E ~44x), the stock is priced for perfection with essentially no margin of safety -- this is a WAIT for better entry.

Key Metrics Dashboard:

---

PHASE 0: Opportunity Identification (Klarman)

Why Does This Opportunity Exist?

The opportunity does NOT currently exist at this price. At CHF 150.60, Medacta trades at ~44x trailing earnings and ~20x EV/EBITDA -- pricing in continued above-market growth for many years. There is no margin of safety.

However, potential future opportunities could arise from:

1. Small-cap neglect in Switzerland: Limited analyst coverage (primarily European sell-side), no US listing, not in major indices. Many global investors simply don't know this company.
2. Periodic share price volatility: The stock has experienced -28% to -23% annual drawdowns in 2019, 2022, and 2024, despite consistently improving fundamentals. Mr. Market overreacts to quarterly noise.
3. Currency translation effects: EUR/CHF movements can create reporting-period confusion (company reports in EUR, trades in CHF).
4. Founder premium compression: If macro risk-off hits, founder-premium stocks in small Swiss companies get hit disproportionately.

Historical buying opportunities:

• COVID crash (Mar 2020): CHF 66 (P/E ~25x)
• 2022 rate shock: CHF 105 (P/E ~28x)
• Late 2024 sell-off: CHF 105 (P/E ~25x on forward)

The pattern is clear: This stock periodically trades at 25-28x earnings when fear dominates, vs. 40-45x when optimism reigns. The opportunity will come again.

---

PHASE 1: Risk Analysis (Inversion Thinking)

"All I want to know is where I'm going to die, so I'll never go there." - Munger

1. Technological Disruption Risk: MODERATE

Robot-Assisted Surgery (RAS):

• Stryker's MAKO, Zimmer's ROSA, and J&J's VELYS are the primary robotic platforms
• Medacta's response: iMNS (intraoperative navigation) and NextAR (augmented reality) -- less invasive than full robotics
• Risk: If robotics become standard-of-care, surgeons may migrate to platforms with integrated robotics
• Mitigation: Medacta's philosophy is "surgeon-centric" rather than "robot-centric" -- their training ecosystem creates loyalty
• Probability of major disruption: 20% over 10 years

3D Printing / Custom Implants:

• MyKnee, MyShoulder, MyHip -- Medacta already has strong personalized solutions
• They are well-positioned here with MyKnee patient-matched instruments
• Not a threat -- actually a strength

2. Regulatory/Legal Risk: LOW-MODERATE

• Swiss-headquartered, manufacturing in Castel San Pietro (Switzerland) + new Sarasota, FL facility
• EU MDR transition creates barriers for smaller competitors but Medacta has navigated it well
• US FDA: Standard 510(k) pathway for implants, no unusual regulatory risks
• Product liability: Inherent in any implant company, but Medacta has no major recall history
• Probability of material regulatory event: 10%

3. Competitive Dynamics Risk: MODERATE

• Market dominated by Big 4: Zimmer Biomet, Stryker, J&J DePuy, Smith+Nephew (~80% share)
• Medacta is a ~2-3% share player globally
• Risk: Big 4 could aggressively defend share through pricing, bundling, or exclusive hospital contracts
• Risk: Surgeon incentive changes (compliance pressure, anti-kickback rules) could slow surgeon switching
• Mitigation: Medacta's growth comes from converting surgeons one-by-one through education, not from price competition
• Probability of competitive response damaging growth: 25%

4. Financial/Operational Risk: LOW

• Heavy CapEx business (EUR 99M in FY2024, ~17% of revenue) -- instruments need to be consigned to surgeons
• Inventory: 466 days! Very high, but industry-typical (consignment model)
• Free cash flow is thin (EUR 8.3M reported, EUR 25.9M adjusted) due to growth investment
• Currency risk: Reports in EUR, trades in CHF, sells globally in USD/GBP/AUD/etc.
• Probability of financial distress: <5%

5. Management/Agency Risk: VERY LOW

• Siccardi family controls ~70% of shares
• Francesco Siccardi (CEO) is 2nd generation, biomedical engineer, worked in company 10+ years before becoming CEO
• No excessive compensation (Swiss governance standards)
• No related-party transaction concerns
• Probability of management failure: <5%

INVERSION SECTION

How could this investment lose 50%+ permanently?

1. A major product recall (contaminated implants, design failure) destroying brand trust with surgeons
2. Robotics becoming mandatory standard-of-care, making Medacta's technique-focused model obsolete
3. Aggressive price war from Big 4 targeting Medacta's growth markets
4. Key-person risk: Alberto Siccardi (founder/chairman) health issue disrupting culture

What would make me sell immediately?

1. Evidence of compromised implant quality or patient harm
2. Francesco Siccardi leaving the company (family breakup)
3. EBITDA margins declining below 23% without credible reason
4. Acquisition of a large, unrelated business (capital misallocation)

Bear case in 3 sentences: Medacta is a tiny player (~2-3% share) in a market dominated by companies with 10-20x its R&D budget and established robotic surgery platforms. Growth is dependent on continuously converting surgeons, which requires heavy spending on education and consigned instruments, resulting in thin free cash flow. At 44x earnings, any growth deceleration will cause a violent re-rating.

---

PHASE 2: Financial Analysis

Revenue Growth Track Record (EUR millions)

5-Year Revenue CAGR (2019-2024): ~13.8% 5-Year CC Revenue CAGR: ~14.3%

This is exceptional for a medical device company. The market grows 4-5%; Medacta grows 14-19%. This means consistent market share gains.

Profitability Analysis

Gross margins are stable at 67-69%, which is strong for orthopedics (comparable to Stryker at ~64% but below Smith+Nephew at ~71%). EBITDA margins have been remarkably stable at 27-30%, demonstrating operating leverage as the company scales.

Net margin volatility (9.3% to 14.2%) is driven by FX gains/losses and interest costs, not operational performance.

ROE & Capital Returns

ROE Decomposition (FY2024):

• Net Income: EUR 72.9M
• Average Equity: EUR ~355M
• ROE = 72.9 / 355 = 20.5%

This passes the Buffett test (ROE > 15%) and has been consistently above 15% for 5+ years.

ROIC Estimate (FY2024):

• NOPAT = EBIT x (1-t) = 90.8 x 0.83 = EUR 75.4M
• Invested Capital = Equity + Net Debt = 379.7 + 161.6 = EUR 541.3M
• ROIC = 75.4 / 541.3 = 13.9%

ROIC of ~14% vs. estimated WACC of ~8-9% = positive economic spread. The company creates value.

Owner Earnings Calculation

Owner Earnings = Net Income + D&A - Maintenance CapEx - Delta Working Capital

Net Income:         EUR  72.9M
+ D&A:              EUR  65.8M (EBITDA - EBIT = 160.2 - 90.8 - ~3.6 SBC)
- Maintenance CapEx: EUR (40.0M) (est. ~40% of total CapEx, rest is growth)
- Delta WC:         EUR (30.0M) (inventory + receivables growth)

Owner Earnings =    EUR ~68.7M

Per share: EUR 68.7M / 19.9M shares = EUR 3.45/share (~CHF 3.21)

VALUATION TRINITY

1. Liquidation Value (Floor)

Per share: EUR 5.74 = CHF ~5.30 (essentially meaningless for a growing business)

2. Going Concern Value (DCF)

Conservative DCF Assumptions:

• Owner Earnings Year 0: EUR 68.7M
• Growth Years 1-5: 12% (below current 16-19%)
• Growth Years 6-10: 8%
• Terminal Growth: 3%
• Discount Rate: 9%

Intrinsic Value (Conservative DCF): EUR 2,047M / 19.9M = EUR 102.9 = CHF ~95.7

Optimistic DCF Assumptions (Growth Years 1-5: 15%, Years 6-10: 10%):

Intrinsic Value (Optimistic DCF): ~EUR 130/share = CHF ~121

3. Private Market Value

Comparable M&A transactions in orthopedics:

• Wright Medical (acquired by Stryker, 2020): ~6x revenue
• Globus Medical + NuVasive merger (2023): ~4x revenue
• Typical orthopedic acquisition: 4-6x revenue, 15-20x EBITDA

Private Market Value:

• At 5x Revenue: EUR 591 x 5 = EUR 2,955M = EUR 149/share = CHF ~138
• At 18x EBITDA: EUR 160 x 18 = EUR 2,884M = EUR 145/share = CHF ~135
• Average: CHF ~137/share

Note: A founder-family company with 70% control is essentially un-acquirable, reducing the relevance of this metric.

4. Relative Valuation

Medacta trades at a premium P/E (44x vs. 22-32x for peers) but arguably deserves it given 3-4x faster growth. However, even with a growth premium, 44x is steep.

Margin of Safety Calculation

Intrinsic Value Estimate (Weighted): CHF ~110-120 Current Margin of Safety: NEGATIVE (-25% to -37%)

The stock is overvalued by 25-37% relative to conservative intrinsic value. Even using optimistic assumptions, there is no margin of safety.

Graham Number

Graham Number = sqrt(22.5 x EPS x BVPS)
EPS (CHF) = 3.40
BVPS (CHF) = 379.7M EUR / 19.9M shares * 0.93 = CHF 17.74
Graham Number = sqrt(22.5 x 3.40 x 17.74) = sqrt(1,362) = CHF 36.92

Current price of CHF 150.60 is 4x the Graham Number. This is emphatically not a Graham-style investment.

---

PHASE 3: Moat Analysis

Moat Sources

1. Surgeon Switching Costs: WIDE MOAT

This is Medacta's primary and most durable moat.

• Surgeons invest 100+ hours learning Medacta's AMIS (hip) or MyKnee (knee) techniques
• The M.O.R.E. Institute provides structured education: cadaver labs, proctored surgeries, ongoing support
• Once a surgeon is trained on Medacta instruments and techniques, switching requires:
  • Learning a new instrument set (weeks of OR time)
  • New surgical technique training (months)
  • Risk of increased complication rates during transition
  • Hospital committee approvals for new vendor
• Switching Cost Ratio: Estimated 6-12 months of disruption / ~30-year surgeon career = very high relative cost
• Evidence: Medacta's surgeon retention rate is very high (implied by sustained growth without losing existing accounts)
• Over 500,000 AMIS procedures performed globally -- a massive installed base

2. Education Ecosystem (M.O.R.E. Institute): NARROW-TO-WIDE MOAT

• The M.O.R.E. (Medacta Orthopedic Research & Education) Institute is a global medical education platform
• Over 30,000 surgeons educated since inception
• Creates a community/network effect among surgeons who share techniques and outcomes
• Functions as both marketing and retention tool
• Durability: Very hard to replicate -- competitors would need decades to build equivalent surgeon networks

3. Vertical Integration + Swiss Manufacturing: NARROW MOAT

• Single manufacturing site in Castel San Pietro, Switzerland (now adding Sarasota, FL)
• Controls the entire value chain: design, manufacturing, sterilization, distribution
• Swiss quality reputation adds brand value
• Limitation: Manufacturing is replicable; Swiss quality is not unique to Medacta

4. Family Ownership as Moat: NARROW MOAT

• Siccardi family's 70% control prevents hostile takeover and activist pressure
• Enables long-term investment in surgeon education (sacrificing short-term profitability)
• Creates cultural alignment between R&D, manufacturing, and sales
• Risk: Concentrated decision-making; succession risk

Moat Durability Assessment

10-Year Moat Trajectory: STABLE to SLIGHTLY WIDENING

• Surgeon switching costs strengthen as installed base grows
• Education ecosystem benefits from network effects
• Risk: Robotics could narrow the moat if technique differentiation becomes less relevant

---

PHASE 4: Management & Incentive Analysis

The Siccardi Family

Total family ownership: ~69.4% -- This is exceptional alignment with minority shareholders.

Capital Allocation Track Record

Capital allocation has been disciplined and growth-oriented. The Parcus Medical acquisition (2025, est. $50-80M) was strategic -- adding sports medicine and US manufacturing. No empire-building acquisitions.

Munger's Question

"If I were management with these incentives, what would I do?"

With 70% ownership and a long-term family legacy at stake, I would:

• Invest heavily in surgeon education and new product development (they do)
• Maintain conservative leverage (they do: 1x net debt/EBITDA)
• Pay a modest but growing dividend to demonstrate cash generation (they do)
• Avoid dilutive acquisitions that risk the core culture (they have)
• Focus on US market penetration as the largest growth opportunity (they do)

Management behavior is perfectly aligned with what rational, long-term-oriented owners would do. Rating: Excellent.

---

PHASE 5: Catalyst Analysis

No Catalyst Assessment

The positive catalysts are organic and long-term. There is no near-term value-realization event (no activist, no spin-off, no special dividend). This means:

• Require larger margin of safety (30%+)
• Accept longer holding period (5-10 years)
• The stock needs to get cheaper, not the business to get better

---

PHASE 6: Decision Synthesis

Megatrend Resilience

Total Score: +6 | Tier 2 "Resilient"

Expected Return Scenarios

Expected return of 1.5% per annum from the current price is inadequate. This confirms the stock is overvalued for a value investor.

Entry Price Calculation

Intrinsic Value Estimate: CHF 115 (weighted average of methods)

Strong Buy:    CHF 80  (30% MOS, P/E ~24x)
Accumulate:    CHF 92  (20% MOS, P/E ~27x)
Fair Value:    CHF 115 (P/E ~34x)
Take Profits:  CHF 138 (20% above IV)
Sell:          CHF 173 (50% above IV)

Current price of CHF 150.60 is 31% ABOVE intrinsic value estimate.

---

INVESTMENT RECOMMENDATION

+-------------------------------------------------------------+
|                   INVESTMENT RECOMMENDATION                    |
+-------------------------------------------------------------+
| Company: Medacta Group SA        Ticker: MOVE.SW              |
| Current Price: CHF 150.60        Date: February 21, 2026      |
+-------------------------------------------------------------+
| VALUATION SUMMARY                                              |
| +-------------------------+-------------+-------------------+  |
| | Method                  | Value/Share | vs Current Price  |  |
| +-------------------------+-------------+-------------------+  |
| | Graham Number           | CHF 36.92   | -75% (no MOS)    |  |
| | Liquidation Value       | CHF 5.30    | -96% (no MOS)    |  |
| | DCF (Conservative)      | CHF 95.70   | -36% (no MOS)    |  |
| | DCF (Optimistic)        | CHF 121.00  | -20% (no MOS)    |  |
| | Private Market Value    | CHF 137.00  | -9% (no MOS)     |  |
| | Owner Earnings (15x)    | CHF 48.15   | -68% (no MOS)    |  |
| | Owner Earnings (25x)    | CHF 80.25   | -47% (no MOS)    |  |
| +-------------------------+-------------+-------------------+  |
|                                                                |
| INTRINSIC VALUE ESTIMATE: CHF 115 (weighted average)          |
| MARGIN OF SAFETY: -31% (OVERVALUED)                            |
+-------------------------------------------------------------+
| RECOMMENDATION: [X] WAIT                                       |
+-------------------------------------------------------------+
| STRONG BUY PRICE:    CHF 80   (30% below IV, P/E ~24x)       |
| ACCUMULATE PRICE:    CHF 92   (20% below IV, P/E ~27x)       |
| FAIR VALUE:          CHF 115  (Intrinsic Value)               |
| TAKE PROFITS:        CHF 138  (20% above IV)                  |
| SELL PRICE:          CHF 173  (50% above IV)                   |
+-------------------------------------------------------------+
| POSITION SIZE: 0% (Wait for entry)                             |
| CATALYST: US market penetration + aging demographics           |
| PRIMARY RISK: Robotics disruption, valuation compression       |
| SELL TRIGGER: EBITDA margin <23%, family exits, quality issue  |
+-------------------------------------------------------------+

Verdict

WAIT. Medacta is a genuinely excellent business with a durable moat, exceptional management alignment, and a long growth runway. It would be a wonderful addition to a quality-focused portfolio. However, the current price (CHF 150.60, P/E ~44x) offers zero margin of safety. Mr. Market has priced in perfection.

Action Plan:

1. Add to watchlist immediately
2. Set price alerts at CHF 92 (accumulate) and CHF 80 (strong buy)
3. Monitor quarterly results for growth deceleration or margin pressure
4. Wait for the next macro-driven sell-off (the stock has dropped 25-30% twice in the last 5 years)
5. If price reaches CHF 90-100 range, initiate a 2-3% position

The patient investor's advantage: Medacta will keep compounding value. The stock price will eventually offer an entry point. There is no rush -- "the market transfers money from the impatient to the patient."

---

Psychology Check

Final Munger Test

1. Circle of Competence: Yes, I can explain this business simply: "Medacta makes hip and knee implants and trains surgeons to use them."
2. Variant Perception: I believe the surgeon switching cost moat is underappreciated by the market, but the market already prices in high growth.
3. Humility Check: If robotics make surgical technique less important, the moat narrows significantly.
4. Inversion Final: If this dropped 50% tomorrow to CHF 75, I would be very excited to buy. That's the right reaction.

---

Sources

Primary Documents Downloaded

Web Sources