STAA · STAAR Surgical
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $33.34
Note written ·
Price against the kill line
20.8% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $33.34, on record since 11 November 2026. The shares are up 9.5% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $33.34, the highest close of the last 126 sessions (26 May 2026), would show the shares leading the S&P 500 and prove this call wrong.
Research onlyNot in the portfolio.
Key figures from the filings · Health Care
Quarter to 2 October 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 83.4
- Revenue, change on a year (%)
- −12.0
- Gross margin (%)
- 70.9
- Operating margin (%)
- 6.5
- Free cash flow, four quarters ($M)
- 17.8
- Net cash, cash less debt ($M)
- 206
- Price to earnings (×)
- 2499.7
- Enterprise value to sales (×)
- 3.4
All filed numbers
What STAAR Surgical reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 83.4 | −12.0 | 70.9 | 6.5 |
| first filed | 93.5 | +111.0 | 74.5 | 10.8 |
| first filed | 93.5 | +119.6 | 73.6 | 8.5 |
| first filed | 57.8 | +18.1 | 75.7 | −39.5 |
| first filed | 94.7 | +6.9 | 82.2 | 19.5 |
| first filed | 44.3 | −55.2 | 74.0 | −67.6 |
| Pre-tax income ($M) | 7.0 |
| Net income ($M) four quarters: 0.5 | 5.6 |
| Diluted shares, change on a year (%) against the quarter to 26 September 2025 | +1.8 |
| Operating cash flow ($M) | 21.4 |
| Capital spending ($M) | 3.5 |
| Free cash flow ($M) | 17.8 |
| Cash and short-term investments ($M) | 206 |
| Debt ($M) | None reported |
| Net cash, cash less debt ($M) no debt reported | 206 |
| Deferred revenue ($M) at 2 January 2026, filed 3 March 2026 | 0.0 |
| Backlog, orders not yet delivered ($M) at 2 January 2026, filed 3 March 2026 | 0.0 |
| Receivables ($M) | 86.5 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 376 |
| Market value ($M) | 1,325 |
| Enterprise value, market value plus net debt ($M) no debt reported | 1,118 |
| Enterprise value to sales (×) no debt reported | 3.4 |
| Enterprise value to operating income (×) no debt reported | 1595.5 |
| Price to earnings (×) | 2499.7 |
| Price to book value (×) | 3.5 |
| Free-cash-flow yield (%) | 1.3 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.4% of shares outstanding sold short, 6.1 days of average trading to cover, −1.1% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $62.8M | $0 |
The thesis
STAAR Surgical's third-quarter report on 4 November 2026 showed demand ahead of supply in China and a weaker gross margin, and the shares closed at $23.87 on 10 November 2026. The next test is whether the fourth-quarter gross margin rises above the third quarter's 70.9% while China seasonality lowers revenue; the report is expected around late February 2027.
The story is well known: the China-recovery story is well known and the 4 November 2026 print answered the main open question, how far China fell from the second quarter's $52.3 million. China sales were $39.3 million, down 30% reported but up 31% once the $25.9 million of deferred China revenue booked in the third quarter of 2025 is removed, per the company's 8-K exhibit. The shares closed 28.4% below the 52-week high of $33.34 and 5.8% lower than three months earlier, per adjusted daily closes.
Bullish and bearish views on STAAR Surgical Company
The bull case on STAAR Surgical Company (STAA), in brief: third quarter beat estimates. The bear case: gross margin fell.
Bull case
- Third quarter beat estimates. Net sales were $83.4 million against a $78.8 million estimate, and earnings were $0.11 per share against $0.05, per 4 November 2026 coverage. Net income was $5.6 million, per the company's release.
- Underlying growth is strong. Total net sales fell 12% from $94.7 million, but rose 21% excluding the $25.9 million of deferred China sales in the year-earlier quarter, per the 4 November 2026 8-K exhibit.
- Demand exceeds supply in China. China distributor inventory ended the quarter below the company's six-month target while in-market volume grew, so shipments should track end demand, per the 4 November 2026 release. Distributor in-market unit growth was 12.4% year to date, per coverage of the earnings call.
- Outside China accelerated. Sales outside China were $44.1 million, up 13% against 6.0% in the second quarter. EMEA rose 31% (51% excluding the Middle East) and the Americas rose 14%, per the 4 November 2026 release.
- Cash is building with no debt. Cash, cash equivalents and investments were $206.4 million at 2 October 2026, up from $181.5 million at 3 July 2026. Free cash flow was $26.4 million in the quarter, per the company.
- A $50 million buyback is authorised. The board approved the program in September 2026, citing undervaluation; the release does not report repurchases. Stifel's target is $31 after its 29 September 2026 upgrade to Buy.
Bear case
- Gross margin fell. Gross margin was 70.9% in the third quarter, down from 74.5% in the second quarter and 73.6% in the first, per the company. It cited higher unit costs, freight, tariffs on U.S.-made lenses shipped to China and larger inventory provisions.
- Management dropped its margin target. It no longer targets a roughly 75% exit-rate margin; it now aims for a fourth-quarter margin above the third, with unit-cost gains pushed into 2027, per coverage of the 4 November 2026 call.
- Supply is still short. Management had said on 12 August 2026 that EVO+ supply constraints should ease by the end of the third quarter. Yields remain below historical levels after the enterprise software (ERP) transition, and the company could not fully meet lens demand, per the 4 November 2026 release.
- China growth came from price. Management said all of the China sales increase came from higher average selling prices, not volume, per the 4 November 2026 call transcript.
- A fourth-quarter China decline is flagged. The company expects seasonality to reduce China revenue and earnings in the fourth quarter, though not free cash flow, per the 4 November 2026 release. It gives no numeric guidance.
- Analyst targets diverge. UBS cut its target to $19 from $20 on 13 August 2026 and Argus lowered its to $21.00 on 16 September 2026, per Benzinga. Revenue is almost entirely one product family, the EVO/EVO+ implantable lens.
Price setup
The adjusted close on 10 November 2026 was $23.87, below the $24.61 close of 28 October 2026 and 28.4% below the 52-week high of $33.34. It sits above the 18 September 2026 close of $20.82, the low before the buyback and Stifel upgrade. A third-party article put the 200-day moving average near $23.66 on the report date.
The 14-day relative strength index was 61.0 on 10 November 2026. Broadwood Partners holds about 31% and Yunqi Capital 6.5%, so the float is small. A 6 November 2026 headline reported a 12-month price target raised to $29.25.
Crowding evidence is limited. The earnings date has passed, no insider selling or share issuance is in the record, and the company has not reported buyback purchases.
Catalysts ahead
- ~2027-02-late (est.): Fourth-quarter 2026 results and earnings call. Shows whether gross margin rises above 70.9%, how far seasonal China sales fall and whether EVO+ supply has caught up with demand.
- Undated: First disclosure of repurchases under the $50M buyback. Repurchases would add demand for a small-float stock; none has been reported.
What would change the view
A daily close above $33.34, the highest close of the last 126 sessions (26 May 2026), would show the shares leading the S&P 500 and prove this call wrong.
What it trades with
STAAR trades on its own China and supply story and is not part of a current theme cluster. Its moves track the Chinese refractive-surgery market, tariff news affecting U.S.-made lenses and takeover speculation tied to Alcon's rejected $30.75-per-share bid. Mid-cap medical-device shares share some sector sensitivity, but the small float lets moves overshoot.
The evidence, claim by claim (7)
- Q3 2026 net sales were $83.4M, down 12% from $94.7M, up 21% excluding $25.9M of deferred China sales in the prior-year quarter. STAAR Q3 2026 8-K exhibit 99.1 · as of
- China sales were $39.3M, down 30% reported and up 31% excluding the deferred sales; sales outside China were $44.1M, up 13%. STAAR Q3 2026 8-K exhibit 99.1 · as of
- Q3 2026 gross margin was 70.9%, versus 74.5% in Q2 2026 and 73.6% in Q1 2026. STAAR Q3 2026 results coverage (Finviz) · as of
- GAAP net income was $5.6M ($0.11 per diluted share); adjusted EBITDA was $14.4M. STAAR Q3 2026 results release · as of
- Cash, cash equivalents and investments were $206.4M with no debt, up from $181.5M at the end of Q2. STAAR Q3 2026 8-K exhibit 99.1 · as of
- China distributor inventory ended Q3 below the six-month target; operating expenses were $53.7M against a $225M annual target pace. STAAR Q3 2026 8-K exhibit 99.1 · as of
- Stifel upgraded STAAR to Buy from Hold and raised its target to $31 from $28. Stifel note via Investing.com · as of
Sources
- STAAR SURGICAL CO - Form 8-K - FY2026 · sec.gov
- STAAR Surgical Reports Third Quarter 2026 Results · finviz.com
- STAAR Surgical beats on demand but margin slide and supply limits complicate the story · finviz.com
- STAAR Surgical Reports Third Quarter Financial Results · visionmonday.com
- STAA STAAR Surgical Company · earningswhispers.com
Related · shared themes
CDNA
CareDx
CareDx's shares are modestly more likely than not to beat the S&P 500: transplant testing revenue grew 39% in the third quarter excluding…
GRAL
GRAIL
GRAIL's shares are more likely to lag the S&P 500 over three months: after a 78.8% three-month rise, approval of the Galleri cancer test…
QDEL
QuidelOrtho
QuidelOrtho's shares are more likely to lag the S&P 500: third-quarter revenue fell 11.6% and net leverage rose to 4.5 times while the…
PLSE
Pulse Biosciences
Pulse Biosciences is modestly more likely to lead the S&P 500 because $189.2 million of cash funds its atrial-fibrillation catheter through…
See also · stocks to watch