Breaking Down Varex Imaging Corporation (VREX) Financial Health: Key Insights for Investors

You're looking at Varex Imaging Corporation (VREX) and seeing a mixed signal: a full-year GAAP net loss of $(1.70) per diluted share, but a non-GAAP net income of $0.90 per diluted share that suggests a defintely stronger operational picture. Honestly, you need to look past the statutory loss and focus on the core business momentum, because the company closed out fiscal year 2025 with total revenue of $845 million, a solid 4% increase year-over-year, and generated $42 million in cash flow from operations. The real story is in the segments: the Industrial business surged, with revenue hitting $252 million, plus the Medical segment grew to $593 million, driven by strong global CT tube sales. This split performance, coupled with a focus on high-growth opportunities like photon counting technology, is why analysts like Oppenheimer maintain an Outperform rating, seeing a potential upside to their $18.00 price target, even with the ongoing tariff risks in China. That's a 35% potential swing from the current price.

Revenue Analysis

If you're looking at Varex Imaging Corporation (VREX), the direct takeaway for fiscal year 2025 is that revenue growth is steady, but the mix is shifting: total revenue hit a solid $845 million, up 4% year-over-year, but the Industrial segment is showing much stronger momentum than Medical. This is defintely a story of two segments, and you need to pay close attention to where the growth is coming from.

Varex's primary revenue sources are split between its two core segments: Medical and Industrial. The company doesn't just sell one thing; they're a key supplier of X-ray imaging components (X-ray tubes, digital detectors, and imaging software) to global Original Equipment Manufacturers (OEMs). The Medical segment is the larger piece of the pie, but the Industrial side is accelerating, which is a good sign for diversification.

Here's the quick math for the full fiscal year 2025 segment contributions:

• Medical Segment: $593 million
• Industrial Segment: $252 million

The Medical segment, which covers nearly all X-ray imaging modalities, grew by a modest 2% to $593 million for the year. The main driver here was strong global demand for Computed Tomography (CT) tubes, which is the largest modality and accounts for about 40% of total medical revenue. Still, sales in other areas like oncology were below their typical trends, which is a near-term risk to watch.

The significant change in the revenue stream is the performance of the Industrial segment. This segment, which includes security and inspection systems, surged to $252 million, marking a substantial 10% year-over-year increase. This growth was largely fueled by sustained momentum in the cargo systems business, which is a clear opportunity for Varex. For example, in the fourth quarter alone, Industrial revenue was up 25%, a stark contrast to the Medical segment's 5% Q4 growth.

To be fair, the company is also investing in new growth initiatives that will change the revenue mix over time, such as advancing photon counting CT technology and expanding low-cost manufacturing in India, which includes the successful launch of a new radiographic detector. These strategic moves are critical for future revenue quality. You can see how these initiatives align with their long-term goals by reviewing their Mission Statement, Vision, & Core Values of Varex Imaging Corporation (VREX).

What this estimate hides is the geographic stability; the Medical segment remains well-balanced across all three major regions-North America, Europe, and Asia-reflecting strong global partnerships with leading imaging OEMs. Your next action is to dig into the margin differences between these two segments, because a higher growth rate in the Industrial business doesn't automatically mean better profitability for the whole company.

Profitability Metrics

You want to know if Varex Imaging Corporation (VREX) is making money efficiently, and the quick answer for fiscal year 2025 is: yes, operationally, but no, on a GAAP (Generally Accepted Accounting Principles) net basis. The key is separating their core business performance from a one-time accounting hit.

For the full fiscal year 2025, Varex Imaging Corporation generated $845 million in total revenue, marking a 4% increase year-over-year. The real story, however, is in the margins, especially when you look past the noise of a significant non-cash charge.

Here's the quick math on their core profitability for the year:

• Gross Profit Margin: The non-GAAP gross margin hit 35% for FY2025, which is a strong improvement of 230 basis points from the prior year. This shows solid cost management and a favorable product mix, especially from the high-margin Industrial segment's cargo systems.
• Operating Profit Margin: The non-GAAP operating margin was 9% of revenue, with non-GAAP operating income at approximately $80 million. This is a significant improvement from the 6% margin in fiscal year 2024.
• Net Profit Margin: On a GAAP basis, Varex Imaging Corporation reported a net loss of approximately $(70) million, resulting in a net profit margin of roughly (8.3%). This loss was almost entirely driven by a $93.9 million non-cash goodwill impairment charge taken in the third quarter.

VREX vs. Industry Benchmarks

When you compare Varex Imaging Corporation's gross profitability to the broader medical device components market, their performance is competitive, but still leaves room for improvement. The non-GAAP gross margin of 35% is slightly below some specialized competitors, like one peer in the medical imaging space whose trailing twelve-month gross margin is around 40.0%.

Honestly, the fact that Varex Imaging Corporation's gross margin is up 230 basis points year-over-year is more critical than the absolute number. It signals a successful trend in operational efficiency (OpEx) and pricing power, despite the headwind of tariffs, which management noted could still impact gross margins by 100 to 150 basis points.

Operational Efficiency and Cost Management

The operational efficiency gains are clear. Look at how they allocate capital: for fiscal year 2025, Research and Development (R&D) spending was $91 million, representing 11% of revenue, which is a healthy commitment to future growth initiatives like photon counting CT technology.

Selling, General, and Administrative (SG&A) expenses were managed tightly at $122 million, or 14% of revenue for the full year. The combination of margin expansion and controlled OpEx is what drove the non-GAAP EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) up 37% to $122 million for the year. That's a huge jump.

The GAAP net loss is a one-time event that distorts the picture of the underlying business. Focus on the fact that the non-GAAP net income per diluted share was $0.90, a 73% increase from the prior year, which is a much cleaner view of their cash-generating ability.

If you want to dig deeper into who is betting on this turnaround, you should check out Exploring Varex Imaging Corporation (VREX) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You're looking at Varex Imaging Corporation (VREX) to understand how they fund their operations, which is smart. The company's financial structure in fiscal year 2025 shows a balanced, though slightly debt-leaning, approach to capital, largely due to a major refinancing move this year. This is a capital-intensive business, so debt is defintely part of the picture.

As of the end of fiscal year 2025, Varex Imaging Corporation reported a gross debt level of approximately $370 million. The structure is heavily weighted toward long-term financing, which is typical for a company with substantial property, plant, and equipment. Short-term debt, or the current portion of long-term debt, is minimal, sitting at around $1.5 million as of the third quarter. This means the company isn't facing a large, immediate debt wall that could strain liquidity in the near term.

The key metric here is the debt-to-equity (D/E) ratio, which tells you how much debt the company uses to finance assets relative to the value of shareholder equity. Varex Imaging Corporation's D/E ratio is approximately 0.75 as of November 2025. Here's the quick math on what that means in context:

• Varex Imaging Corporation's D/E Ratio: 0.75
• Industry Median (Surgical and Medical Instruments): 0.70 (2024 median, a close proxy)

A ratio of 0.75 is slightly above the industry median of 0.70 for Surgical and Medical Instruments. To be fair, a ratio under 1.0 is generally considered healthy, as it shows that equity still finances more of the assets than debt does. The company is using debt moderately, a common strategy for medical device companies with stable, recurring revenue streams to boost returns on equity (ROE) for shareholders. They are not over-leveraged, but they are using leverage to grow.

The biggest capital management event of 2025 was the successful refinancing of their maturing debt. The company repaid $200 million of Convertible Notes that came due in June 2025. This was partially funded by issuing new Senior Secured Notes and establishing a Revolving Credit Facility, which had an available balance of $154.8 million as of early October 2025. This action simplifies the capital structure and pushes out maturity dates, which is a clear positive for financial stability.

Varex Imaging Corporation balances its funding by relying on debt-the Senior Secured Notes-for cost-effective, long-term capital, while maintaining a healthy equity base. The new Revolving Credit Facility provides a strong liquidity cushion, which is essential for managing working capital and seizing strategic opportunities like potential acquisitions. This mixed approach gives them flexibility; they are not currently planning to issue cash dividends, preferring to reinvest or manage their debt load. For a deeper dive into the company's overall performance, you can check out the full post: Breaking Down Varex Imaging Corporation (VREX) Financial Health: Key Insights for Investors.

Liquidity and Solvency

When you look at Varex Imaging Corporation (VREX), the immediate takeaway is that their short-term liquidity is defintely strong, but the cash flow statement shows a deliberate, strategic use of capital to clean up the balance sheet. You don't have a liquidity problem here; you have a company managing its debt load.

The most recent fiscal year 2025 data shows Varex Imaging Corporation (VREX) maintaining a very healthy liquidity position. The Current Ratio, which measures a company's ability to cover its short-term liabilities with its short-term assets, stood at a robust 3.51. This means for every dollar of current debt, the company has $3.51 in current assets to cover it. That's a massive buffer.

The Quick Ratio (or acid-test ratio), which strips out inventory-often the least liquid current asset-was still strong at 1.82. For a manufacturing business like Varex Imaging Corporation (VREX), which carries significant inventory of X-ray components and systems, a Quick Ratio this high is a clear sign of operational efficiency and a solid working capital position. This suggests that even without selling a single new component, they could cover their immediate bills.

Here's the quick math on their working capital trends:

• Strong Liquidity: Current Ratio of 3.51 is well above the 1.0 benchmark, indicating low near-term default risk.
• Quality of Assets: Quick Ratio of 1.82 shows a high proportion of liquid assets relative to liabilities.
• Strategic Debt Paydown: The company used cash to pay down a $200 million convertible note in the fiscal year, a key solvency move.

Looking at the cash flow statement for the full fiscal year 2025, Varex Imaging Corporation (VREX) generated a solid $42 million in cash flow from operations (CFO). This operating cash generation is the lifeblood of the business, showing they are earning real cash from their core activities, which is a significant strength. However, the cash, cash equivalents, and marketable securities balance did decrease from $213 million at the end of FY2024 to $155 million at the end of FY2025.

This decline in the cash balance was not a liquidity concern, but a planned financing activity. The company used a substantial amount of cash to repay the outstanding principal of its $200 million convertible note. This is a positive for long-term solvency, as it reduces future interest expense and strengthens the balance sheet, even if it temporarily draws down the cash pile. You can see their strategic direction in their Mission Statement, Vision, & Core Values of Varex Imaging Corporation (VREX).

To put the full picture into perspective, let's look at the cash flow components in the table below, focusing on the full fiscal year 2025 performance:

The key risk here isn't a lack of cash to pay bills, but rather the strategic trade-off: a lower cash reserve means less dry powder for a large, immediate acquisition or a major capital expenditure without tapping the debt markets again. Still, the high liquidity ratios and the debt-to-equity ratio of 0.78 suggest Varex Imaging Corporation (VREX) remains financially stable and well-positioned to manage its obligations.

Valuation Analysis

You're looking at Varex Imaging Corporation (VREX) and asking the right question: Is the stock priced fairly, or is the market missing something? Based on the latest fiscal year 2025 data, the stock appears to be trading at a compelling discount to its intrinsic value, particularly when looking at book value, but the mixed analyst consensus suggests caution. It's a classic value play with a clear growth narrative, but you need to understand the risk.

The company's valuation multiples, while not screamingly cheap on a historical earnings basis, look attractive against the sector. Varex Imaging Corporation's normalized Price-to-Earnings (P/E) ratio is around 11.69, which is reasonable for a medical technology component supplier. However, the real signal is in the Price-to-Book (P/B) ratio, which sits at just 0.90. This P/B below 1.0 means the stock is trading for less than the value of its net assets, which is a strong indicator of being undervalued.

Here's the quick math on the enterprise value:

• Price-to-Book (P/B): 0.90-This is the key signal; the market values the company below its net asset value.
• Price-to-Earnings (P/E, Normalized): 11.69-A modest multiple, especially considering the company's non-GAAP Earnings Per Share (EPS) grew 73% to $0.90 for fiscal year 2025.
• Enterprise Value-to-EBITDA (EV/EBITDA): 10.14-This is a good metric to compare against peers, and it suggests a fair, but not deeply discounted, operating valuation.

What this estimate hides is the GAAP net loss of $(1.70) per diluted share for FY2025, which stems from non-cash items, making the non-GAAP EPS of $0.90 a more defintely relevant measure of core profitability.

Stock Performance and Analyst Sentiment

The stock's recent performance reflects the market's uncertainty. Trading around $11.86 in November 2025, Varex Imaging Corporation has seen its price decline by approximately -18.54% over the last 12 months. The 52-week range of $6.76 to $16.93 shows significant volatility, but the current price is closer to the low end, suggesting a potential recovery opportunity if their growth initiatives pay off.

Analysts are split, but the overall sentiment leans positive, which is a good sign for potential upside. The consensus is mixed, with some firms maintaining a 'Hold' rating, but others issuing 'Buy' ratings. The average analyst target price is set between $17.00 and $17.80. This target range suggests a potential upside of over 50% from the current trading price, which is a substantial return for any portfolio.

One simple fact: Varex Imaging Corporation is not a dividend stock. The company maintains a 0.00% dividend yield and does not pay a dividend, meaning all capital is being reinvested into the business-a common trait for a growth-focused technology company. This reinvestment strategy is aimed at funding their key growth areas, like the photon counting technology for CT and the expansion of their Industrial segment, which saw a 25% sales increase in Q4 2025.

To dive deeper into who is taking this bet, you should be Exploring Varex Imaging Corporation (VREX) Investor Profile: Who's Buying and Why?

Next step: Check institutional ownership changes to see if smart money is accumulating shares at this P/B discount.

Risk Factors

You're looking at Varex Imaging Corporation (VREX) and seeing a strong $845 million in fiscal year 2025 revenue, but the risks are real and demand a clear-eyed view. The company operates in a high-stakes, highly regulated space, which means the risks aren't just about market cycles; they are structural and geopolitical. We need to focus on where the financial pain points are right now.

The most immediate financial red flag is the $(69.9) million GAAP net loss for fiscal year 2025, which was heavily impacted by a massive $93.9 million goodwill impairment charge. That's a non-cash hit, but it signals that the value of past acquisitions in the Medical segment isn't holding up against current macroeconomic challenges. Plus, the company's Return on Equity (ROE) sits at a concerning -24.79%, and the Altman Z-Score, a measure of bankruptcy risk, is a low 1.58, putting Varex in the distress zone. That's not a comfortable place to be.

Operational and Concentration Risks

Operational risks for Varex center on supply chain fragility and customer concentration. They rely on a limited number of suppliers for key X-ray components, and while management is working on resilience, any new disruption could immediately increase costs and delay product delivery. Honestly, a single-source component failure could stall a whole product line.

• Customer Concentration: One original equipment manufacturer (OEM) customer alone accounted for 18% of Varex Imaging Corporation's total revenue in 2025. Losing or even seeing a significant reduction in orders from this one customer would materially affect sales.
• Supply Chain and Inflation: Ongoing inflation and logistics issues continue to pressure gross margins. Management estimates that tariffs alone impact the gross margin by 100 to 150 basis points.
• Liquidity and Debt: The company has total debt of $367.5 million as of October 3, 2025. While they have a revolving credit facility with $154.8 million available for liquidity, the debt load and its associated covenants impose limitations on financial and operating flexibility.

Geopolitical and Regulatory Headwinds

The external environment, especially in global trade, presents a persistent headwind. Varex Imaging Corporation operates across the Americas, EMEA, and APAC, making it highly exposed to shifting geopolitical tensions and trade wars. The US-China trade tensions, for instance, continue to drive up costs through tariffs and create uncertainty that can delay customer purchasing decisions.

Regulatory compliance is also a major, costly factor. Evolving international regulations for medical devices and environmental standards are complex to navigate. Failure to secure timely regulatory clearances or approvals for new products, like their advanced photon counting technology, could delay market entry and erode their competitive advantage. You can read more about the company's position in the broader market here: Breaking Down Varex Imaging Corporation (VREX) Financial Health: Key Insights for Investors.

Mitigation Strategies and Outlook

Management is defintely aware of these pressures and has clear strategies in place. They are actively trying to diversify their OEM customer base to reduce the 18% concentration risk. To combat supply chain and geopolitical risk, they are investing in regional manufacturing, particularly with the ramp-up of new product introductions from their facility in India. Plus, they are passing on some of the tariff costs to customers to protect their margin.

Here's a quick summary of the key financial risks and the company's non-GAAP performance, which shows a better underlying picture, with non-GAAP Earnings Per Share (EPS) at $0.90 for the year:

The strategic move to invest in next-generation technologies, like photon counting, is the long-term play here, aiming to maintain technological leadership and create a moat against competitors. Your next step should be to track the revenue contribution from their new India facility and monitor the year-over-year change in that single 18% customer concentration.

Growth Opportunities

You're looking for a clear map of Varex Imaging Corporation's (VREX) future, and honestly, the path runs right through innovation and strategic global expansion. The company closed its fiscal year 2025 with total revenue of $845 million, a solid 4% increase year-over-year, which sets a decent foundation. The real story, though, is how they are positioning themselves for the next wave of growth, particularly in their Industrial segment and with next-generation medical technology.

Here's the quick math on where the growth is coming from: the Industrial segment revenue surged by 25% in Q4 2025, reaching $77 million, driven by the cargo systems business. This shows diversification is defintely working. For the full fiscal year 2025, Industrial revenue was $252 million, up 10%, while the larger Medical segment grew 2% to $593 million. That Industrial momentum is key.

Varex Imaging Corporation's future revenue growth projections, based on their Q1 fiscal year 2026 guidance, are expected to land between $200 million and $215 million. Non-GAAP net earnings per diluted share are projected to range from $0.05 to $0.25 for that same quarter. What this estimate hides is the ramp-up of new initiatives, which will likely fuel the back half of the year.

The company's strategic initiatives are focused, concrete actions that will drive earnings. They are investing heavily in R&D-$91 million in fiscal 2025, representing 11% of revenues-to maintain a technological edge. This investment translates directly into key growth drivers:

• Photon Counting Technology: Developing this next-generation technology for Computed Tomography (CT) is a major product innovation that could capture significant market share.
• Industrial Cargo Systems: They secured over $55 million in orders and shipped more than 15 new systems in fiscal 2025, cementing their lead in high-energy security inspection.
• India Manufacturing Expansion: Launching a new radiographic detector from their low-cost facility in India not only helps mitigate tariff impacts but also positions them to capture the growing value-tier and mid-tier markets in South Asia and the Middle East.

Varex Imaging Corporation's competitive advantage lies in its sheer breadth of X-ray imaging components, spanning nearly all medical modalities, plus a strong, diversified Industrial business. This breadth, combined with deep global partnerships with leading imaging Original Equipment Manufacturers (OEMs), makes them a critical, embedded supplier. Their strategic move to expand low-cost manufacturing in India while simultaneously leading with high-end innovation like photon counting creates a powerful dual-pronged approach to market growth.

For a deeper dive into who is betting on this strategy, you should check out Exploring Varex Imaging Corporation (VREX) Investor Profile: Who's Buying and Why?

Here is a quick breakdown of the core financial segments and their fiscal 2025 performance: