RadNet, Inc. (NASDAQ:RDNT) stock is trading lower on Tuesday. Hunterbrook Capital released a short report on Tuesday on the company, stating that the smaller companies are slapping "AI" on their pitch decks and watching their valuations soar.
RadNet is a provider of freestanding, fixed-site diagnostic imaging services in the United States. It runs a network of 407 owned and/or operated outpatient imaging centers.
Benzinga has reached out to RadNet for comments, and is yet to hear from the company.
Short Seller Claims
For years, RadNet operated a straightforward business: a network of outpatient imaging centers providing mammograms, CT scans, X-rays, and other diagnostic services.
The stock traded below $15 until 2020, when management rebranded the company as a leader in AI-driven imaging, particularly in mammography, ultrasound, and X-ray.
Investors embraced the shift, the short report highlighted. Shares climbed as high as $86, pushing RadNet's market capitalization above $6 billion, roughly three times last year's revenue.
The valuation appears aggressive given that the core business remains a low-margin.
"The company's stock has soared in value since its AI rebrand, trading at a much higher multiple than historic norms and competitors," the report added.
The report also alleged that RadNet's AI offering is, financially speaking, a rounding error. Even in the company's published numbers, less than 5% of its revenue comes from Digital Health.
The report claims that most of that growth appears to come from internal sales to RadNet's own imaging centers rather than from third-party adoption.
Stripped of its technology narrative, RadNet operates like a conventional imaging provider, and several core financial metrics warrant scrutiny. One key example is same-center sales growth.
Sell-side analysts frequently cite same-center sales at RadNet's imaging centers as a bullish indicator.
However, this metric depends on a stable and transparent definition of the company's operating footprint. Evidence suggests that the footprint has not been consistent over time.
Volume Is Not Expanding
According to an analysis by Hunterbrook, conducted with independent financial analysts, RadNet has effectively combined nearby locations into single reporting units.
By closing centers within 15 minutes of remaining sites, the report alleged that RadNet appears to have shifted patients rather than expanded volume. Excluding this effect, organic growth is estimated at 2.5%–3%, versus the reported 6%–10%.
Recent Earnings
RadNet reported third-quarter adjusted earnings of 20 cents per share, missing the consensus of 22 cents. Sales reached $522.87 million, beating the consensus of $494.41 million.
The company raised its fiscal 2025 sales guidance from $1.93 billion-$1.99 billion to $1.985 billion-$2.025 billion compared to the consensus of $1.973 billion.
RDNT Price Action: RadNet shares were down 7.40% at $67.21 at the time of publication on Tuesday, according to Benzinga Pro data.
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