Earnings call transcript: Stille posts record Q2 2026 sales as stock slips

Stille posted Q2 revenue of SEK 187m (+50% YoY) with organic growth of +27% and EBIT up 65% YoY to SEK 27.4m (EBIT margin 14.6% vs 13.3%). Profitability improved despite gross margin slipping to 48.4% (from 52.1%) on a mix shift from Surgical Holdings and higher surgical-table contribution; operating cash flow nearly doubled to SEK 29.3m and the company ended with net cash (net debt/EBITDA -0.2x). The stock fell 2.31% to $254 on perceived gross-margin pressure/tariff uncertainty and the lack of a direct EPS comparison, though management expects solid demand to continue and backorders to decline gradually through 2H 2026.

Analysis

The market is signaling that this is now a valuation story, not a growth story. For a premium multiple name, the key issue is that a meaningful share of current outperformance appears to be supply catch-up and mix rather than purely clean end-demand, which makes the next 2-3 quarters vulnerable to deceleration even if bookings stay decent. The operating leverage is real, but it is also fragile: when a business depends on a mix of high-margin consumables/instruments plus lumpier capital equipment, small changes in product mix can swamp the headline growth narrative.

Second-order effects matter here. Improved delivery and lower backorders help near-term revenue conversion, but they also pull forward demand, which can create a tougher compare once inventory and service levels normalize. The added tariff/MDR spend is not just a P&L nuisance; it likely raises the floor for SG&A and capitalized development, which compresses the quality of earnings and limits how much the market should pay for current growth. If the company cannot show sustained gross-margin repair after acquisition mix and table volatility normalize, the multiple should continue to compress.

Consensus seems to be underestimating how quickly sentiment can reverse if the next quarter shows slower sequential growth or another step down in gross margin. The contrarian bull case is that tariff refunds and a cleaner supply chain could create a few quarters of upside surprises, but that is more of a timing trade than a fundamental re-rating. The bear case is stronger over 1-3 months if management keeps talking about elevated backorders, higher compliance spend, and volatile table demand while the stock remains near the top of its range.

Key Decisions for Investors

• If borrow is available, short TSTS on any post-earnings bounce; use a 1-3 month horizon and size for a 15-20% downside re-rating if growth moderates or margin mix worsens.
• Pair trade: long SYK or MDT / short TSTS to express relative-quality medtech exposure; thesis is that large-cap peers have cleaner margin durability and lower multiple risk over the next quarter.
• Set a watch item for the next report: if gross margin fails to recover and management still describes backorders as elevated, treat that as a confirmation of deceleration risk rather than a temporary hiccup.
• If options are liquid, consider a bearish put spread in TSTS into strength, targeting a move back toward the lower end of the recent range; thesis breaks if sequential sales remain strong and operating costs stay flat.
• Take profits / reduce shorts if management quantifies material tariff refunds or if sequential organic growth stays resilient while gross margin stabilizes, as that would extend the de-rating timeline.