Tandem Diabetes (TNDM): Buy, Sell, or Hold Post Q2 Earnings?

Shareholders of Tandem Diabetes would probably like to forget the past six months even happened. The stock dropped 37.8% and now trades at $12.82. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy Tandem Diabetes, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Tandem Diabetes Will Underperform?

Even with the cheaper entry price, we're swiping left on Tandem Diabetes for now. Here are three reasons there are better opportunities than TNDM and a stock we'd rather own.

1. Weak Sales Volumes Indicate Waning Demand

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Healthcare Technology for Patients company because there’s a ceiling to what customers will pay.

Tandem Diabetes’s pump shipments came in at 21,000 in the latest quarter, and over the last two years, averaged 2.9% year-on-year growth. This performance slightly lagged the sector and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. 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 21% 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.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Tandem Diabetes burned through $7.76 million of cash over the last year, and its $449 million of debt exceeds the $315.4 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Tandem Diabetes’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Tandem Diabetes until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Tandem Diabetes falls short of our quality standards. Following the recent decline, the stock trades at 15.7× forward EV-to-EBITDA (or $12.82 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at one of our all-time favorite software stocks.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.