International Expansion Will Accelerate Healthcare Digital Transformation

Key Takeaways

• Expansion into new markets and strong UK presence support diversification and increased recurring revenue through digital healthcare transformation and regulatory trends.
  
• Operational leverage and innovation in modular solutions drive margin expansion and position the company for continued growth in recurring earnings.
  
• Heavy reliance on the UK market and a few large contracts, coupled with international expansion risks and rising operating costs, threaten earnings stability and predictable growth.

Catalysts

Engages in the development and licensing of healthcare software products in Australia, New Zealand, and the United Kingdom.

• Strong growth in annual recurring revenue (ARR), up 31% in FY25 and supported by multi-year modular contracts, provides high visibility for future revenue, as healthcare providers globally accelerate their shift to digitized workflows and electronic records.
  
• Validation of Alcidion's Miya Precision platform with significant new long-term contracts, especially in the UK (now 63% of revenue), and expansion into new geographies (Canada, Saudi Arabia, UAE), positions the company to benefit from healthcare's ongoing digital transformation and regulatory drive for interoperability, likely supporting top-line revenue and international earnings diversification.
  
• Successful "land-and-expand" strategy is driving increased contract values with existing clients (e.g., contract extensions with Hume and Northern Territory), leveraging the modular platform for upsell and cross-sell, supporting rising recurring revenue and longer average contract tenures.
  
• Operational leverage is becoming evident, with revenue growth outpacing direct and operating cost increases, leading to sharply higher EBITDA and maiden net profit after tax-suggesting future margin expansion as digital transformation in healthcare intensifies and scale grows.
  
• Investment in experienced leadership (especially in the UK and for global expansion) and ongoing innovation in modular solutions prepares Alcidion to capture sustained demand for data-driven clinical decision-making and value-based care initiatives, supporting recurring earnings growth and future margin resilience.

Alcidion Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Alcidion Group's revenue will grow by 8.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.1% today to 5.5% in 3 years time.
• Analysts expect earnings to reach A$2.9 million (and earnings per share of A$0.0) by about September 2028, up from A$1.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$5.2 million in earnings, and the most bearish expecting A$1.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 69.7x on those 2028 earnings, down from 73.1x today. This future PE is greater than the current PE for the AU Healthcare Services industry at 59.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.44%, as per the Simply Wall St company report.

Alcidion Group Future Earnings Per Share Growth

Risks

• Alcidion's increasing dependence on the UK market (63% of FY25 revenue) exposes the company to macroeconomic instability, NHS funding fluctuations, and changing government IT investment policies, which could negatively affect future revenues and earnings stability.
  
• Management highlighted the risk of contract renewal delays and funding allocation issues (e.g., Dartford and Gravesham NHS Trust's postponed EPR procurement), indicating customer decision cycles can be protracted or uncertain-this threatens pipeline conversion rates and can lead to unpredictable revenue recognition and slower ARR growth.
  
• Although Alcidion's modular sales enable easier product upselling, much of the company's revenue growth remains tied to a small number of large, multi-year contracts, increasing earnings volatility if key contracts are not renewed or delayed.
  
• Ongoing international expansion into markets like Canada, Saudi Arabia, and the UAE carries execution and integration risks (due to different regulatory environments, clinical practices, and sales cycles), potentially leading to elevated costs and lower net margins if new regions underperform or market entry is slower than anticipated.
  
• The company's stated focus on controlling expenses and steady headcount may be challenged by wage inflation, skills shortages, and rising R&D and compliance costs (especially related to cybersecurity and evolving data privacy regulations), putting upward pressure on operating expenses and downward pressure on net profit, especially as healthcare IT regulatory requirements grow more complex over time.

Valuation

• The analysts have a consensus price target of A$0.12 for Alcidion Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$0.13, and the most bearish reporting a price target of just A$0.1.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$52.0 million, earnings will come to A$2.9 million, and it would be trading on a PE ratio of 69.7x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of A$0.09, the analyst price target of A$0.12 is 25.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.