Pulmonx: A Glimmer of Hope in a High-Growth Sector?

Pulmonx (NASDAQ: LUNG) has been a rollercoaster ride for investors, but recent developments suggest this medical device company might be on the cusp of a meaningful turnaround. While the stock is still bleeding red ink, the numbers tell a compelling story of resilience and growth. Let's dive into the data and see whether this underdog is worth the risk—or if it's time to cut your losses.

The Numbers Don't Lie: Revenue Growth and Earnings Beating

Pulmonx just delivered a Q1 2025 report that outperformed expectations. Revenue hit $22.5 million, a 20% year-over-year jump, with international sales surging 39%—a sign that the Zephyr Valve is finding traction beyond U.S. borders. Even better, the company beat EPS estimates by 11.11% in Q1, reporting a loss of -$0.36 per share versus the expected -$0.41. That's not a profit, but in a sector where losses are the norm, this kind of execution matters.

The company reaffirmed its full-year revenue guidance of $96–$98 million, a target that now seems achievable given the momentum. Sequential growth in Q2 is projected at $23.46 million, which would mark a 4.25% increase from Q1. While that's modest, it's consistent with the company's strategy of gradual expansion.

Historically, LUNG's stock has shown mixed short-term performance following earnings beats. From 2022 to the present, the stock has a 40.00% win rate over 3 days, 30.00% over 10 days, and 50.00% over 30 days after beating expectations. For example, on January 1, 2022, the stock dropped 3.66% despite an earnings beat, suggesting market skepticism or external factors may have offset the positive news. While these results highlight the volatility of the stock, they also underscore that long-term outperformance (50% win rate over 30 days) is more consistent with the company's strategic progress.

Valuation: Cheaper Than the Average Medical Device Peer

Here's where things get interesting. Pulmonx trades at a negative P/E ratio of -1.74, a metric that screams “growth stock” to risk-tolerant investors. But let's compare that to the broader medical device industry. As of July 2025, the Medical Devices sub-industry has a P/E ratio of 35.08x, while the overall Medical Equipment & Supplies sector sits at 44.0x. Pulmonx's negative P/E makes it look like a bargain in a sector where investors are willing to pay a premium for earnings.

On the P/S front, the Medical Devices sub-industry trades at 3.58x, and the broader industry at 4.7x. Pulmonx's current P/S ratio—calculated at roughly 13x based on its $109 million market cap and $96–$98 million revenue guidance—is astronomically high. But here's the kicker: Most medical device companies trade at a discount because they're cash-flow positive. Pulmonx, however, is still burning cash. So while its P/S ratio is inflated, its revenue growth (20% YoY) and international expansion make it a high-risk, high-reward play.

The Big Picture: Is This Stock Undervalued?

Let's separate the wheat from the chaff. Pulmonx is losing money—badly. Its net loss in Q1 was $14.4 million, and it's on track for a full-year EPS of -$1.54. But in a sector where companies like Medtronic (MDT) and Boston Scientific (BSX) trade at P/Es of 30–40x, Pulmonx's negative P/E is actually a feature, not a bug. Investors are betting on its ability to eventually flip the script and become a cash-flow-positive business.

The real catalyst? The AeriSeal CONVERT II trial. If successful, this could unlock a new patient population for Pulmonx's therapies, expanding its addressable market from 500,000 to over 2 million patients. That's the kind of growth that can justify a high P/S ratio.

Risks to Consider

Don't be fooled by the revenue numbers. Pulmonx's operating expenses are rising—up 8% YoY in Q1—and it's burning through cash at a rate of $1.54 per share annually. The company's $88.7 million cash balance gives it some runway, but without a path to profitability, this could get ugly. Plus, the stock has been volatile: a 10% 5-day gain followed by a 1% 1-week decline.

Final Verdict: A Buy for the Brave

Pulmonx is a classic “growth at a reasonable price” stock—if you can stomach the risk. Its revenue growth is solid, and its international expansion is a tailwind. The stock is undervalued compared to peers, but only if you believe the AeriSeal trial and Zephyr Valve adoption will pay off.

For the aggressive investor, this could be a speculative buy at current levels. But for the risk-averse, it's a watch-and-wait situation. The bottom line? Pulmonx has the potential to be a 10-bagger if it can turn its losses into profits. But if the AeriSeal trial fails or revenue growth stalls, the stock could crater.

Bottom line: If you're comfortable with high risk and have a long-term horizon, Pulmonx's improving financials and market potential make it a stock to consider. But don't bet the farm—this is a high-stakes game.