← The Rundown
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Welcome back to the Rundown for another weekend deep Dive. Today we are talking about Medline, a little known company that just had the biggest IPO of 2025. You know, 2025 was a year of high profile IPOs. We had Circle, Klarna, Figma, Corwee. But none of those IPOs were bigger than Medline, a company that you've probably never heard of unless you're a medical professional. Medline is a medical equipment company that manufactures and sells everything from surgical kits to gowns to gloves and even those iconic striped baby blankets for hospitals all over the world. Now, on the surface, you might think this is the most boring IPO of the year, but Medline has been growing revenues for 50 consecutive years and they have a very strong customer retention. So in today's episode, we'll break down how this company has come to dominate the medical equipment space, why the CEO thinks the company is the Costco of healthcare, and some headwinds the company could face in the future. We got a great one for you today. Let's dive, dive in. Before we get into the financials, let's take a quick look back at the path that Medline took to become the largest IPO of the year. Medline has been around for 50 years. It was founded back in 1966 by two brothers, Jim and John Mills. And what's interesting is that Medline first went public back in 1972. But the mills brothers didn't like being a publicly traded company, so they bought back all the shares to take the company private. And, and the Mills family spent the next 40 years building a medical supply empire. Fast forward to 2021. The Mills family finally decided to cash out a chunk of the business. They sold 79% of the company to a consortium of private equity firms and a leveraged buyout deal valued at $34 billion. Now, this is important because this deal loaded up the company with debt, which we'll get to in a bit. Now, some of the private equity firms that bought Medline included blackrock and Carlisle. And this was one of the largest leveraged buyouts since the financial crisis. Well, four, those private equity firms are taking Medline public again to get a return on their investment. And so far, it's been a pretty strong start. Medline started trading on Wednesday under the ticker symbol MDLN. And the IPO was priced at $29 a share, which was at the top of its range. And the company ended up raising $6.3 billion from the IPO proceedings. And despite Medline not being A household name. The stock had a big pop on day one, jumping over 40% and closing at a market cap of over $50 billion. Now this might be kind of surprising, but this was the largest IPO since Rivian back in 2021. In fact, according to Bloomberg, this is only the fifth US listed company to raise more than $5 billion in an IPO over the past decade. The others being Rivian, Uber, ARM holdings and Lineage, which is a warehouse company. So why are investors so excited about a company that sells mask and hospital gowns? Well, it's because their business model is selling similar to Costco. So let's talk about it. The CEO of Medline, Jim Boyle, was on CNBC this week and he said his aspiration for Medline is to be the Costco of healthcare.
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I consider Medline in and of one my aspiration is to be the Costco of healthcare. What I mean by that is if you think about Costco, they have a membership model that people pay to be a member of. Medline has a prime vendor model that both the vendor community and our customers pay to be a member of. They have a Kirkland brand that drives savings in value for their membership and accretive margins for Costco. We have the Medline brand that does the exact same thing. Costco has a pretty robust resilient supply chain and we have over 335,000 products with 29 million square feet in the US that we serve customers from.
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Medline is currently the largest supplier of medical supplies with a broad selection of products. And similar to Costco, they also have a strong private brand. New Costco has the Kirkland brand, Medline has the Medline brand. I guess they weren't very creative with the naming. Now the company did $25 billion in revenue in 2024 and 49% of that came from their own Medline branded products, which has better margins than selling other companies products. On top of that, a third of Medline branded products are self manufactured, which allows Medline to avoid third party manufacturing costs which also helps improve margins. But beyond just selling their own Medline branded products, Medline also sells hundreds of thousands of Med Surge products From more than 1000 third party suppliers as part of their supply chain solution business. And it's this business that's one really turned Medline into a moat. It's not just all their products, it's their distribution. Medline operates 33 manufacturing facilities and 69 global distribution centers. And they have a fleet of more than 2,000 trucks that allows it to do next day delivery to 95% of US hospitals. This segment also provides customized supply chain optimization services for hospitals and healthcare providers. So Medline can help solve operational problems like inventory and warehouse management. This one two punch of Medline products and supply chain solutions is what makes Medline a vertically integrated market leader. And it's resulted in the company having robust growth over the last 50 years. So let's dig into the bull case for the company. Why did Medline stock a company that most people haven't heard of jump 40% on its first day of trading? Well, I'll give you a few reasons. For one, Medline has grown annual revenue for 50 consecutive years at 18% CAGR. That is an absolutely wild stat. I mean, just think about that. Their revenues have gone up even in economic downturns. That brings me to my next bullish point. This company seems to be recession proof. For example, Medline's net sales grew approximately 17% during the 20082009 financial crisis. And they also saw an 11% annual growth between 2020 and 2022 during the COVID 19 pandemic. I feel like that kind of makes sense though, because like everyone needed medical supplies back then. But I mean, zooming out though, a big reason they're able to grow revenue so consistently even during an economic downturn is because they have a 98% customer retention rate. Once a hospital or a medical facility switches to Medline, they basically never leave. A Medline is a one stop shop. You know, by switching to Medline, hospitals can get all of their equipment from one company. They don't have to order scallops from one company and bed sheets from another. They can order it all from Medline. And because of Medline's distribution network, a truck will arrive at the hospital the next day with all the stuff. And a big tailwind for the company is is that the demand for medical products is only expected to grow as the American population continues to age. The number of Americans aged 65 and older is projected to increase by 47% from 2022 to 2050. And today, approximately 60% of Americans have at least one chronic disease with approximately 40% having two or more. That's why Medline believes there's going to be increased spending on health care over the long term. In fact, in their S1 filing, Medline calls out that the national health expenditures are are projected to outpace GDP growth with an annual growth rate of 5.6% from 2023 to 2032 according to projections from the center for Medicare and Medicaid services. So the population getting old and people spending more time at the hospital, that's great for Medline's business going forward. So if all that sounds too good to be true, well, we should talk about some of the headwinds and concerns facing the company. All right, so we've talked about Medline's business model, we've talked about their consistent growth, we've talked about their long term tailwinds. But there are some real risk and concerns. The first one and the most glaring one, the debt on the company. You guys remember the private equity buyout that I mentioned earlier? Well, the private equity firms loaded up Medline with a ton of debt to pay for the buyout back in 2021. Now, Medline is planning to use $4 billion of the IPO money to pay down some of the debt. But even after paying down some of the debt, Medline will still have over $12 billion of debt on their balance sheet. So that means for the foreseeable future, a chunk of their profits will go towards interest payments. Now, speaking of profits, Medline is a low margin business. Medline's operating margins are like 8 to 9%. And that kind of makes sense if you think about it, right? Like they're not selling IP driven medical breakthroughs like an Eli Lilly. Medline is selling commoditized, mass produced products. So there is less upside for investors to be excited about. And another challenge that Medline has been dealing with lately is tariffs. You know, Medline does manufacture a ton of products overseas, so these tariffs from the Trump administration could eat into their margins even further. In fact, in their own filings, Medline estimates that tariffs could hit their profits by $325 million to $375 million in fiscal 2025 and between 150 and $200 million in fiscal 2026. It also doesn't help that Medline's growth has dropped below 10% over the last few years as well. So when you take into account the massive debt load, the slowing growth and the impact of tariffs and the lack of upside, there are real reasons to be skeptical about Medline and the recent hype around the stock. So what's my take here? Well, Medline is a boring company, but they have a great business with an incredible moat. And if you're someone that likes investing in companies like that, then Medline could be a good addition to your portfolio. But personally, it's not. For me, the debt load, the lack of upside, not to mention the lack of dividends, it just doesn't get me excited, especially when you look at the 2026 IPO calendar. There are rumors of a SpaceX, OpenAI, Databricks, maybe even Waymo. All I IPOing in 2026 and where I'm at as an investor, I'm trying to find high upside investments. Well all right guys, that's it for today's weekend deep dive. Hope you guys enjoyed that one. Honestly, that was a fun one to research for. Let me know in the comments of what you guys thought about Medline and if you'd consider investing in them. And if you really enjoyed that breakdown, consider giving us a five star rating on Apple and Spotify and a thumbs up on YouTube. You know, all that engagement really does help us out and it helps other people find the show. Thank you guys so much for listening, watching and commenting. Shout out to Mike and Connor for all the work behind the scenes and we'll see you guys back here tomorrow. And Doug, here we have the Limu Emu in its natural habitat, helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug. Uh, Limu is that guy with the binoculars watching us. Cut the camera. They see us. Only pay for what you need@libertymutual.com Liberty Liberty Liberty Liberty Savings Ferry underwritten by Liberty Mutual Insurance Company and affiliates excludes Massachusetts.
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