AOTI Inc (AIM:AOTI), the medical technology company and market leader in topical oxygen therapy (TOT) for chronic wounds, is trading at more than a 50% discount to sector peers despite faster underlying growth.
That is the top-line conclusion of research carried according to Panmure Liberum, which has reiterated its 'buy' recommendation and 74p target price on the stock.
The note follows the company's decision to cease enrolling new patients in Arizona from 1 April, a move the broker argues is strategically sound, eliminating a drag on cash flow caused by unpaid Medicaid claims that had built to $15.6 million by year-end 2025.
Panmure analysts Julie Simmonds and Seb Jantet argue the market has misread the Arizona exit as evidence of structural decline, when it instead returns the business to positive cash flow and reduces risk to earnings estimates.
The bigger prize, in the broker's view, is a pending coverage determination from the Centers for Medicare and Medicaid Services (CMS), the US federal agency responsible for Medicare and Medicaid reimbursement, on TOT for the treatment of diabetic foot ulcers (DFUs), open sores on the feet that develop in people with diabetes and carry significant risks of hospitalisation and amputation.
A positive draft Local Coverage Determination, which the broker says could arrive at any time following AOTI's own "near term" guidance, would unlock access to approximately 16 million Medicare patients and is expected to accelerate Medicaid adoption across states where the company does not yet have mandated coverage.
AOTI's TWO2 device, which combines pressurised oxygen delivery with cyclical compression and humidification, commands over 75% of the US TOT market and has been used in more than 40,000 patients.
Sales for 2025 reached $66.5 million, up 14% year-on-year, with Veterans Affairs (VA) business returning to growth in the final quarter after disruption earlier in the year caused by Department of Government Efficiency (DOGE) restructuring.
Panmure forecasts broadly flat revenue for 2026 due to the Arizona exit, but underlying growth of around 14.5% excluding that state, rising to $82 million in 2027 and $101 million in 2028 as Medicaid expansion and the anticipated CMS ruling take effect.
The broker's discounted cash flow valuation implies 128p per share.
In afternoon trading, the shares were changing hands for 31.15p.