Is Glaukos Corporation (GKOS) Trading at a 43% Discount to Its Intrinsic Value?

The med-tech sector has long been a magnet for investors seeking growth in innovation-driven industries. Yet, within this crowded field, few companies combine the precision of medical science with the financial rigor of disciplined capital allocation. Glaukos Corporation (GKOS), a leader in glaucoma and corneal health solutions, appears to be one such outlier. Using a two-stage discounted cash flow (DCF) model and a deep dive into its earnings growth trajectory, this analysis argues that Glaukos is trading at a 43% discount to its intrinsic value, presenting a compelling opportunity for long-term investors.

A Two-Stage DCF Model: Unveiling the Discount

The DCF model, a cornerstone of intrinsic value analysis, projects a company's future free cash flows (FCF) and discounts them to their present value. For Glaukos, the first stage captures the next decade of high-growth FCF, while the second stage accounts for the terminal value (TV) of cash flows beyond 2035.

1. Stage 1: High-Growth FCF (2025–2035)
   Glaukos's Q2 2025 results underscore its robust growth. Net sales surged 30% year-over-year to $124.1 million, with the U.S. Glaucoma franchise alone growing 45% to $72.3 million. The company's non-GAAP gross margin of 83% and operating losses narrowing from -$39.1 million in Q1 2024 to -$15.2 million in Q1 2025 highlight improving operational efficiency.

Analysts project Glaukos's FCF to reach $601 million by 2035, with a 10-year present value of $2.3 billion at a 7.5% cost of equity (derived from a levered beta of 0.960). This assumes a 3.1% long-term growth rate post-2035, aligning with the U.S. glaucoma market's expansion.

1. Stage 2: Terminal Value
   The TV, calculated using the 2035 FCF and a 3.1% growth rate, is estimated at $14 billion. Discounted to present value at 7.5%, this contributes $6.8 billion to the total equity value.

Total DCF Equity Value: $2.3 billion (Stage 1) + $6.8 billion (Stage 2) = $9.0 billion.

By contrast, Glaukos's current market capitalization (as of August 21, 2025) is $5.42 billion, implying a 43% discount to its intrinsic value.

Earnings Growth: A Catalyst for Re-rating

Glaukos's earnings trajectory is equally compelling. In Q2 2025, the company's non-GAAP net loss narrowed to $13.6 million from $26.3 million in Q2 2024, driven by disciplined SG&A spending (up 26% vs. revenue growth of 30%) and R&D efficiency. With $278.6 million in cash and no debt, Glaukos has the liquidity to fund its pipeline while maintaining flexibility for strategic acquisitions (e.g., Mobius Therapeutics).

The iDose® TR therapy, a long-duration intracameral treatment, is a key growth driver. Generating $31 million in Q2 2025, it represents a 70% increase in adoption year-over-year. Meanwhile, the pending FDA approval of Epioxa (corneal cross-linking therapy) by October 2025 could unlock a $1.2 billion market, further accelerating revenue.

Valuative Mispricing in the Med-Tech Sector

The med-tech sector is notoriously volatile, with investors often overreacting to short-term clinical setbacks or regulatory delays. Glaukos's recent 0.28% post-earnings dip, despite a 7.35% revenue beat, reflects this dynamic. However, the company's 6.49 current ratio, 2% debt-to-capital ratio, and $480–$486 million 2025 sales guidance suggest a fundamentally sound business.

Investment Thesis: A Buy for the Long-Term

The 43% discount to intrinsic value is not a fluke—it's a structural mispricing. Glaukos's dropless platform technologies, strong cash generation, and pipeline of FDA-cleared therapies position it to outperform peers. While the med-tech sector faces near-term headwinds (e.g., reimbursement pressures), Glaukos's focus on chronic, high-prevalence conditions (glaucoma affects 76 million globally) ensures durable demand.

Risks to Consider:
- Regulatory delays for Epioxa or iStent Infinite.
- Intensifying competition in the glaucoma space.
- Macroeconomic headwinds affecting discretionary healthcare spending.

However, these risks are mitigated by Glaukos's $303.4 million cash runway, no debt, and first-mover advantage in dropless therapies.

Conclusion: A Compelling Buy at a Material Discount

For investors with a 5–10 year horizon, Glaukos offers a rare combination of innovative science, financial discipline, and undervaluation. At $93.50 (August 21, 2025), the stock trades at 6.8x 2025 sales and 12x 2025 non-GAAP EBITDA, well below its 10-year average multiples. With a DCF-derived intrinsic value of $158–$160 per share, the upside potential is substantial.

Final Recommendation: Buy Glaukos Corporation (GKOS) at current levels, with a target price of $160 and a stop-loss at $85 to manage downside risk.