Why shares of TransMedics stock crashed this week

Actions of TransMedics (TMDX -5.03%)the leader in heart, lung and liver transplant technologies, were down 15% in the past week as of 4 p.m. ET Thursday, according to data from S&P Global Market Intelligence.

While no specific news sent the company down, the move is likely related to the stock’s rising volatility after a remarkable doubling in value over the past year.

Can TransMedics meet the high expectations of the market?

Over the past year, TransMedics’ one-year beta — which measures a stock’s relative volatility compared to the market — has risen from 1.6 to 5.1. With a beta value above 1 indicating higher volatility, the company’s high and growing score of 5.1 shows that it is truly one of the wildest rides in the market.

Adding even more volatility to TransMedics stock, its percentage of outstanding shares held short has risen from 4% to 18% over the past three years. This over-allocation of traders betting against the stock shows that the market is increasingly pessimistic about the company’s chances of continuing to deliver near-perfect results.

However, despite this higher volatility, TransMedics’ price-to-sales (P/S) ratio has fallen from 30 to 14 since 2021, thanks to the company’s average sales growth rate of 147% over that time. Additionally, the company’s ability to keep organs alive and healthy for longer after donation has finally translated into positive net income and free cash flow over the past year.

This profitability occurred despite the company acquiring and integrating a charter flight operator along with several aircraft to build its national transplant logistics network.

Finally, TransMedics has a first-mover advantage with its organ care system and is revolutionizing the organ transplant industry. However, at 109 times forward earnings, interested investors must maintain a decades-long time horizon.