Utah Medical Products, Inc. $UTMD

The thesis

Utah Medical Products, Inc., of Midvale, Utah, develops, makes and sells disposable and reusable specialty medical devices, with a focus on health care for women and their babies, used by clinicians in more than a hundred countries (results release, Oct 2026). Its UK subsidiary Femcare developed the Filshie Clip System, and at the end of August 2026 Femcare bought Orion Medical Supplies in the UK (release). Our case is that a business that kept about 30% of its sales as net income over the last twelve months, with no debt and a large cash balance, is priced as if its sales decline will not stop, while the company keeps returning cash to holders and its CEO is buying.

The evidence

Cash and no debt. Cash and investments were $85.2M at 30 September, against $85.8M at the end of 2025, and the company has no debt (release). At the 3 November close of $70.02 and 3,175,006 shares outstanding at 30 September, the market value is about $222M, so cash and investments are about 38% of it (release, Yahoo Finance and Nasdaq). This year the company paid $3.0M of dividends, spent $0.9M on buybacks, $5.0M on Orion including fees and $0.5M on equipment, all from operations (release).

Margins held while sales fell. Third-quarter sales fell 12.1% to $8.6M from $9.8M, mainly because its two former largest customers, PendoTECH and the China distributor of its blood pressure monitoring kits, bought nothing this year; Orion added $619K (release). Gross profit fell 13.6% and gross margin slipped to 56.1% from 57.1%, but operating income rose 7.0% to $2.8M, a 32.4% margin against 26.6% (release). The rise came from lower expenses: the Femcare intangible amortization ended in the first quarter of 2026 ($536K a year earlier), the year-earlier quarter carried a $395K write-off of a China receivable, and litigation costs were lower (release). Net income rose 5.9% to $2.8M, or $0.876 a diluted share against $0.820, helped by a tax rate of 18.1% against 20.5% (release).

Cash goes back to holders. On 3 November the board raised the quarterly dividend 1.6% to $0.315 a share, payable 5 January 2027 to holders of record on 17 December (8-K). Dividends took 37% of nine-month net income (release). The company bought back 464,299 shares from the end of 2023 through September 2026 at an average of $62.95, $29.2M in all, and shares outstanding fell 4.8% from 3,335,156 at the end of 2024 to 3,175,006 (release).

The CEO bought. Kevin Cornwell, chairman and CEO, bought 1,000 shares in the open market on 29 October at $66.75, $66,750, and did not tick the box for a Rule 10b5-1 trading plan (Form 4). His IRA and two family trusts hold 189,472 shares after the purchase, about 6% of the shares outstanding at 30 September (Form 4, release).

What the market is missing

The quarter's sales fell for a reason the company names: two customers that bought nothing this year. As those sales went away, quarterly net income stayed between $2.6M and $2.8M in each of the last five quarters, while third-quarter sales were $8.6M against $9.8M a year earlier (10-K, 10-Qs, release). On trailing twelve-month net income of about $10.6M, the market value is about 21 times earnings, and $85.2M of it is cash and investments (10-K, release).

The risks

Sales are shrinking. Nine-month sales fell 12.2% to $25.9M, Filshie sales fell 32.7% in the quarter and 15.7% in the nine months, and neonatal device sales fell 17.7% in the nine months (release). New biopharma customers have come in slower than the company expected, and it projects a full-year 2026 sales decline close to 7% (release). Nine-month net income fell 7.4% to $8.1M (release). The third-quarter profit gain came from expenses that ended and a lower tax rate, not from sales. Inventories rose $2.6M this year as the company kept production up, and buybacks slowed to $0.9M in the nine months from $7.4M a year earlier (release). In two of the four courts (out of nineteen) where Filshie cases remain, the cases are expected to go to trial in 2027 (release).

What would change our mind

Sales still falling once the lost customers drop out of the year-earlier figures, in the first half of 2027; operating margin back below 30%; cash and investments falling while the company is not spending on buybacks or acquisitions; or a loss in the Filshie trials large enough to dent the cash balance.