A Game-Changing Deal May Flip The Script For This Understated Stock

Waystar (NASDAQ: WAY), a provider of cloud-based software for healthcare payments, is worth watching for several compelling reasons ahead of its upcoming earnings:

• The company has signed up for an acquisition that should expand its total addressable market (TAM) by over 15% and expected to be immediately accretive to both gross margin and adjusted EBITDA margins.
• The (acquisition) target company provides software that helps ensure accurate reimbursement for care delivered to patients – a significant concern amid growing frustration over denied healthcare claims.
• There’s a strong possibility that Waystar will raise its 2025 revenue guidance when it reports Q2 results on July 30, after market close.
• The stock currently trades at an attractive discount relative to its sector on a Price/Earnings to Growth (PEG) basis.

Waystar Overview

Waystar serves around 30,000 clients. Its enterprise-grade platform processes over 6 billion healthcare payment transactions annually, including over $1.8 trillion in annual gross claims and spanning approximately 50% of U.S. patients.

Why Is Waystar Stock Worth Watching?

Catalyst 1: Acquisition That Could Be a Gamechanger

Waystar has agreed to acquire Iodine Software in a $1.25 billion, 50/50 mix of cash and stock deal. Iodine Software provides AI-powered clinical intelligence software to eliminate revenue leakage, lower administrative burden, and ensure accurate reimbursement.

Waystar notes that up to 60 million claims are denied each year due to administrative errors, costing U.S. healthcare providers billions in lost revenue. Public frustration with denied claims reached a flashpoint last year following the high-profile news involving a UnitedHealth executive, underscoring a broader systemic issue. The Iodine acquisition positions Waystar to address this pain point at a time of heightened awareness around administrative inefficiencies in healthcare.

The deal is expected to close by the end of 2025. Post-acquisition, Waystar will own 92% of the combined company, with Iodine shareholders holding the remaining 8%. Advent, Iodine’s largest shareholder, will receive only Waystar shares in connection with the transaction and will agree to a lock-up period of 18 months after the deal closes. A lock-up clause in deals typically aims to protect the buyer’s interests, by preventing early share sales by key stakeholders.

How Waystar Benefits From the Iodine Acquisition

• Margin accretion: The deal should be immediately accretive to gross margin and adjusted EBITDA.
• Revenue Growth And EPS Accretion: Positive impacts on revenue growth and adjusted EPS to begin in 2027.
• Recurring revenue model: Iodine’s subscription-based model will drive more predictable cash flows and unlock cross-selling potential
• Market expansion: Total Addressable Market (TAM) grows by more than 15%.
• Cost synergies: About $15 million in cost synergies expected within 18–24 months of closing.
• Customer base: The combined firm will serve 17 of the 20 top-ranked U.S. hospitals.
• Balance sheet strength: Waystar expects to close the deal with an adjusted net leverage of ~3.5x, which is up from 2.8x in 2024, but down from 6.6x in 2023.

Catalyst 2: Why Waystar Is Likely To Raise Its 2025 Revenue Guidance

Waystar is scheduled to report Q2 results on July 30 after market close and and its preliminary revenue guidance is already ahead of expectations:

• The company guided Q2 revenues to $271 million, compared to consensus estimate of $255.3 million.
• The Q2 guidance represents a 6% increase from Q1 revenue of $256.4 million and a 15.6% Y-o-Y increase from $234.5 million.
• In April, Waystar guided for 2025 revenues of $1.006 billion and $1.022 billion. This implies a quarterly revenue run-rate of $251.5-255.5 million. With Q2 revenues expected to be roughly $15-20 million higher than this quarterly run-rate, a modest upward revision for 2025 appears likely.

Catalyst 3: Compelling Relative Valuation

A PEG ratio below 1 typically signals that a stock may be undervalued relative to its earnings growth. Waystar trades at a forward PEG of 0.67, which is attractive in isolation—but even more compelling when compared to the sector average of 1.82, representing a 63% discount. Even a modest rerating to a PEG of 0.81 would imply 20%+ upside, based on conservative assumptions.

Bottom Line

With a high-quality acquisition on deck, potential for upward revenue revisions, and a significant valuation gap to peers, Waystar appears well-positioned for a rerating, but execution will be key.