Oura will struggle to justify pulse-racing $16bn valuation

What’s your score? Kim Kardashian and Gwyneth Paltrow aren’t the only wearers of Oura smart rings to obsess over their daily sleep ratings. The Finnish-American wearables maker’s upcoming initial public offering is the latest sign of investor interest in so-called preventive healthcare. But to justify a mooted $16bn valuation, it will need endorsements of a more scientific kind.

The current wave of efforts to bind wearers ever more closely to devices, from connected glasses and wristbands to sensor-bearing socks, may bring in $1tn in cumulative sales between this year and 2032, estimates tech specialist Counterpoint Research. Smart rings account for $44bn, a fraction of the $300bn-plus each for watches and hearing devices such as earbuds and smart hearing aids.

As care costs soar, the health-related uses become more valuable. Continuous monitoring might flag a problem sooner than a patient’s next routine medical visit. Apple, Samsung and Google’s Fitbit unit have variously got the green light for functions detecting potential arrhythmia, sleep apnoea and hypertension among other conditions. Once a user has built up months or years of data in a particular device, they’re less likely to swap to a rival.

Oura’s business doesn’t rely on regulatory approvals for its data or functions, but it is bang in the space between health gadget and medical device. Multiple clinical studies are using its data while last year the 13-year-old company appointed its first chief medical officer. A partnership with Essence Healthcare enables eligible plan beneficiaries to get an Oura ring with a subscription — and for their data to be monitored by the US insurer’s doctors.

Being accepted into the medical orthodoxy could be financially transformative. But even then, the suggested valuation looks pulse-racingly high. Apple and Garmin, device makers par excellence, trade at about 20 times forward ebitda, according to LSEG. Even if Oura’s ebitda doubles this year, it would be trading at 80 times. Profit would need to double three years in a row to bring its valuation into line with its much larger peers.

To be more than a lifestyle gadget, Oura and rivals also need to overcome doctors’ concerns: a survey this year from the American Medical Association showed that four-fifths of doctors used wearables themselves, but raised professional issues including their legal liability and the cost of monitoring data. Still, with two-fifths of Oura’s new users being drawn in by word of mouth, wearables fans are already proving a persuasive bunch.

[email protected]