Is RadNet's AI Growth Story Sustainable Amid Short-Seller Scrutiny and Analyst Optimism?

The valuation of RadNet (RDNT) has surged in 2025, with its price-to-sales (P/S) ratio reaching 2.79x as of December 2025-well above the healthcare industry average of 1.34x and its peer average of 1.13x. This premium reflects investor enthusiasm for the company's AI-driven digital health initiatives, but it also raises critical questions about the sustainability of its growth narrative. With short-sellers like Hunterbrook Capital accusing RadNet of inflating AI revenue through internal sales and opaque margin adjustments, while analysts like Raymond James defend its operational strategy, the debate over valuation realism and growth credibility has intensified.

Valuation Multiples: A Premium Built on Growth or Optimism?

RadNet's valuation metrics are strikingly elevated. Its price-to-earnings (P/E) ratio of 211.9x and enterprise value-to-EBITDA (EV/EBITDA) multiple of 22.9x according to analysis suggest investors are paying a significant premium for earnings and cash flow. By comparison, the broader healthcare AI sector averages EV/EBITDA multiples of 11.5x for mid-sized platforms, while tech-driven imaging firms with proprietary AI tools trade at 6x to 8x revenue according to market data.

RadNet's P/S ratio of 3.2x in early 2025 according to financial data further underscores its divergence from industry norms.

These multiples hinge on the assumption that RadNet's AI segment-its Digital Health division-will scale into a material revenue driver. In Q3 2025, Digital Health revenue grew 51.6% year-over-year to $24.8 million, with AI revenue within the segment surging 112%. However, as Hunterbrook Capital notes, this growth is largely fueled by intercompany sales to RadNet's own imaging centers, not external clients according to the firm's analysis. With AI contributing less than 5% of total revenue ($65 million out of $1.5 billion in the first nine months of 2025) according to the firm's report, the question remains: Can RadNet monetize its AI tools beyond its internal ecosystem?

Short-Seller Critiques: Revenue Inflation and Operational Opacity

Hunterbrook Capital's bearish thesis centers on RadNet's operational transparency. The firm argues that the company's AI revenue is artificially inflated by internal sales, with external adoption of its tools-such as Enhanced Breast Cancer Detection and DeepHealthOS-remaining minimal according to the firm's report. Additionally, the short-seller highlights inconsistencies in RadNet's financial disclosures, including conflicting reports on the number of imaging centers and revenue figures according to SEC filings.

SEC filings further complicate the narrative. RadNet's Digital Health segment includes intersegment revenue, which accounted for a significant portion of its $24.8 million Q3 2025 results. While the segment's adjusted EBITDA margins improved by 26 basis points to 16.2%, these figures exclude stock-based compensation and R&D expenses, raising questions about true profitability. Insider selling of over 780,000 shares-valued at $50.9 million-also signals skepticism about long-term fundamentals according to SEC filings.

Analyst Optimism: Growth from Consolidation and Digital Health

Raymond James and other proponents argue that RadNet's growth is credible, citing strategic consolidations of smaller imaging centers into larger, more efficient facilities. These closures, they claim, have boosted same-center revenue growth from an estimated organic 2.5%–3% to 6%–10%. The firm also defends RadNet's adjusted EBITDA metrics, emphasizing cost savings and operational efficiencies from AI integration according to the company's filings.

Third-quarter results support this optimism: Total company revenue rose 13.4% to $522.9 million, with adjusted EBITDA increasing 15.2% to $84.9 million. Digital Health's 51.6% revenue growth aligns with RadNet's broader strategy to leverage AI for workflow automation and diagnostic accuracy. However, the absence of specific 2026 growth projections from management leaves analysts relying on extrapolated trends, which may overstate external demand for its AI tools according to financial analysis.

Valuation Realism: A Clash of Models

The debate over RadNet's intrinsic value is stark. Simply Wall St estimates a fair value of $92.50 per share, implying upside from its current price of $76.68 according to the analysis. Conversely, a discounted cash flow analysis suggests an intrinsic value of $33.10, indicating overvaluation by more than 115% according to the analysis. These divergent conclusions reflect differing assumptions about the scalability of RadNet's AI business.

For the premium to be justified, RadNet must demonstrate that its AI tools can achieve broader market adoption-beyond internal use-while maintaining high-margin growth. The healthcare AI sector's projected expansion, with the U.S. market expected to grow from $524 million in 2024 to $6.76 billion by 2033 according to market analysis, offers a tailwind. However, RadNet's current revenue model, reliant on internal sales and facility consolidations, may struggle to replicate this trajectory without external validation.

Conclusion: A High-Stakes Balancing Act

RadNet's valuation premium reflects a bet on its AI-driven transformation, but the sustainability of this narrative depends on resolving key uncertainties. While the company's Digital Health segment shows rapid growth, its reliance on internal sales and limited external adoption exposes it to risks if industry multiples contract or growth expectations falter. Short-seller critiques on operational transparency and revenue inflation add further pressure, particularly as insider selling and inconsistent disclosures erode confidence.

Analysts remain divided: Optimists highlight RadNet's strategic consolidations and AI innovation, while skeptics question the realism of its valuation. For investors, the critical question is whether RadNet can evolve from an internal AI integrator to a scalable, externally adopted technology leader. Until then, the stock's premium will remain a precarious balancing act between growth optimism and operational scrutiny.