Waystar: The Market Discounted the Whole Stock for Half Its Business

Waystar is down about 27% year to date, sitting near $24 after trading at $40 as recently as a year ago. The easy read of the chart is that healthcare revenue-cycle software has fallen out of favor, and there is some truth in that. But the stock is really one company with two very different engines, and the market appears to have applied a discount built from one of them to the entire business. That gap is worth testing.

The flat engine that set the price

Start with the engine that most investors are looking at. Roughly 44% of Waystar's revenue is volume-based — fees tied to the claims, denials, prior authorizations, and patient payments it processes for hospitals and clinics. That business is basically flat. In the first half of 2026 it grew about 5% year over year, and in the three months ended June 30 it grew just under 3%.

Management is candid about the ceiling on this leg. On the second-quarter call, Waystar said transaction utilization has returned to its long-term average of "that 1%-2%" per year, and that a stretch of 3%-4% growth in recent years was partly COVID catch-up. Around 15% of total revenue comes from collecting out-of-pocket patient balances, which is tied to high-deductible plans and drifts lower in the fourth quarter. This is an annuity that roughly keeps pace with the volume of insured medical activity — and insured activity is the very thing health-policy investors are worried about, with Medicaid rolls and ACA exchange lives both being pressured lately.

That is a legitimate reason for the multiple to compress. A software company whose growth is anchored by a low-single-digit transaction line deserves less than one growing its core at 30%+. So far, the market is being consistent. The question is whether it stopped paying for the other engine too.

The subscription engine is now the majority

The other half of Waystar is subscription revenue — the software platform, its AI workflow and denial-prevention tools, and the Iodine clinical-documentation products it bought. This is where the growth actually lives. In the first half of 2026 subscription revenue rose about 36% year over year to $348 million, and it now makes up roughly 55% of the total. In the June quarter, subscription was up about 34% while reported revenue overall rose 18%.

The blended result is a company growing reported revenue about 17%-20% with increasing margins: second-quarter adjusted EBITDA margin was 43%, and for the first half adjusted EBITDA rose nearly 24%. For the full year, management nudged guidance higher, calling for revenue of $1.276 billion to $1.294 billion (about 17% growth) and adjusted EBITDA of $535 million to $545 million.

The AI angle is the part the market may be pricing too early to value. Waystar is not pitching an AI roadmap; it says the tools are already "embedded and monetized" in client workflows, with more than a dozen providers committing to its next-generation anomaly-detection product in the first half. On the Q2 call, CEO Matt Hawkins described 2026 as the year of selling and setting up implementations, with revenue contribution becoming "increasingly visible through 2027" as large eight-figure deals ramp over roughly 18 months.

Put a number on what you'd be paying

Here the work gets less forgiving. Waystar carries real leverage — total debt of about $1.9 billion against a market capitalization of roughly $4.6 billion — so enterprise value is about $5.9 billion, not the headline equity figure. Against that, the 2026 adjusted EBITDA outlook of $540 million works out to an EV/EBITDA multiple near 11x. On a trailing basis the company trades around 13.5x EV/EBITDA and about 34x GAAP earnings, with free cash flow of $246 million over the trailing twelve months.

An 11x forward EV/EBITDA for a business growing double-digit revenue with 42% adjusted EBITDA margins is not obviously expensive, even with the flat transaction coin. But it is not dirt cheap either, and there is a reason the market paused: the subscription leg cannot carry the whole company on its own. Because ~44% of revenue only keeps pace with insured volumes, blended growth is capped in the mid-teens unless the subscription mix keeps climbing. That is the crux of the argument, and the honest version of it cuts both ways. If subscription keeps compounding at 30%+, the volume leg becomes a shrinking share of a bigger pie and the discount looks overdone. If insured volumes keep contracting and transaction fees start to fall in dollars rather than just grow slowly, the flat leg drags the whole story toward single digits.

The moat reads best on the strength of the two structural facts that set waystars apart from point-solution rivals: Waystar works across 500-plus EHR vendors rather than being tied to one, and it calls itself the "system of action" that sits on top of the "system of record" that Epic and Cerner provide. That is a defensible position against EHR vendors moving into revenue cycle — outcomes and denial-rate improvements, not novelty, are what hospitals buy. It is not a risk-free moat; the same EHR platforms remain its largest potential competitors. But nothing in the first-half numbers suggests the moat is cracking.

What the setup is really asking

The market's 27% year-to-date decline was not irrational on its face — half the business grows at the rate of the health-policy environment, and that environment turned choppy. But that specific worry has been applied to the entire enterprise value, including a subscription-and-AI leg compounding in the mid-30s that is now the majority of revenue and runs at 40%+ margins. The most informative single fact in the quarter is that management raised guidance even as the stock kept falling.

This is not a "the market has it completely backwards" call. It is closer to a testable setup: the bull case depends on subscription growth staying north of 30% while the transaction line merely flattens rather than erodes, with the payback loaded into 2027. The bear case only needs the volume leg to turn negative in dollars. For an investor willing to hold past the implementation-heavy 2026 into the 2027 ramp, the risk/reward around an 11x forward EV/EBITDA looks more attractive than the year-to-date price action suggests. For anyone who needs the near-term, the flat engine is the honest anchor that says wait — the discount exists for a reason, and the market is within its rights until that subscription curve proves itself over the next few quarters.