STAAR Surgical’s 23.7% return over the past six months has outpaced the S&P 500 by 13.1%, and its stock price has climbed to $21.14 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy STAAR Surgical, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think STAAR Surgical Will Underperform?

We’re glad investors have benefited from the price increase, but we're swiping left on STAAR Surgical for now. Here are three reasons there are better opportunities than STAA and a stock we'd rather own.

1. Declining Constant Currency Revenue, Demand Takes a Hit

In addition to reported revenue, constant currency revenue is a useful data point for analyzing Medical Devices & Supplies - Specialty companies. This metric excludes currency movements, which are outside of STAAR Surgical’s control and are not indicative of underlying demand.

Over the last two years, STAAR Surgical’s constant currency revenue averaged 10.7% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests STAAR Surgical might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, STAAR Surgical’s margin dropped by 37.3 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s in the middle of a big investment cycle. STAAR Surgical’s free cash flow margin for the trailing 12 months was negative 17.1%.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, STAAR Surgical’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

We cheer for all companies helping people live better, but in the case of STAAR Surgical, we’ll be cheering from the sidelines. With its shares beating the market recently, the stock trades at 43.3× forward P/E (or $21.14 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d suggest looking at one of our all-time favorite software stocks.

Stocks We Like More Than STAAR Surgical

Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.