Tandem Diabetes has gotten torched over the last six months - since December 2025, its stock price has dropped 25.8% to $16.77 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Tandem Diabetes, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Tandem Diabetes Will Underperform?
Even though the stock has become cheaper, we’re swiping left on Tandem Diabetes for now. Here are three reasons you should be careful with TNDM, plus one stock we’d rather own.
1. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Tandem Diabetes’s earnings losses deepened over the last five years as its EPS dropped 19.1% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Tandem Diabetes’s low margin of safety could leave its stock price susceptible to large downswings.
2. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Tandem Diabetes’s five-year average ROIC was negative 47.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.
3. New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Over the last few years, Tandem Diabetes’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We see the value of companies making people healthier, but in the case of Tandem Diabetes, we’re out. Following the recent decline, the stock trades at 18.9× forward EV-to-EBITDA (or $16.77 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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