iRhythm Holdings, Inc. (IRTC), a maker of cardiac monitoring devices, did not immediately tell investors its billing practices for a key product are under federal scrutiny.

Though the company was aware of the probe December 12, 2025, iRhythm did not disclose the matter until it filed its annual report nearly three months later, saying:

“...we received a civil investigative demand from DOJ’s Civil Division’s Commercial Litigation Branch seeking information and documents related to Zio AT and our associated claims for reimbursement. We have cooperated, and are continuing to cooperate, fully in connection with these matters.”

Zio AT is iRhythm’s mobile cardiac monitoring system and fetches a higher price per unit than its non-portable offering and is growing at approximately twice the company’s average.

The receipt of a CID, in our view, suggests iRhythm is being scrutinized for potential violations of the False Claims Act (FCA) which can impose civil penalties on companies that defraud the federal government.

Executives did not mention the probe on the company’s earnings call but did repeatedly tout Zio AT as a “...durable growth driver” that is “...performing incredibly well.” .

Not surprisingly, executive bonuses are largely tied to revenue targets.

In late 2024, iRhythm’s Chief Financial Officer (CFO) quit and was replaced by the company’s head of Investor Relations (IR).

With an Enterprise Value (EV) of approximately $5.6 billion, iRhythm is priced as if it will grow annual sales to more than $6.9 billion, up from the 2026 consensus estimate of $876 million. To justify its current share price of $158.88 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates iRhythm must:

—Grow sales 25% annually for the next decade, faster than the consensus 2026 estimate of 17.3% and three-year average of 22.1%
—Increase NOPAT margin to 12%, versus our 2025 estimate of (5.4%) and three-year average estimate of (16.7%)
—Increase Invested Capital (IC) Turns to 1.5, up from our three-year estimate of 1.1

Notably, the current share price also implies iRhythm increases Return on Invested Capital (ROIC) to 18% from our 2025 estimate of (5.6%) and three-year average estimate of (20.7%).

Also notable, the model’s share count does not take into account iRhythm’s 2029 Notes which, if converted to stock at $147.22, could increase shares outstanding by 4.49 million shares, or 13.5%: