Resource Efficient Kitchen Technology Will Unlock Global Opportunities

Key Takeaways

• Rising demand for energy-efficient, automated kitchen solutions and ongoing innovation drive revenue growth, margin improvement, and market share gains for the company.
  
• Expansion in emerging markets and continued investment in sales and R&D support geographic diversification, sustained order growth, and stable long-term earnings.
  
• Margin pressure, concentration risk, conservative growth, intensifying competition, and slowing core product growth threaten RATIONAL's profitability and long-term revenue stability.

Catalysts

Engages in the development, production, and sale of professional cooking systems for industrial kitchens in Germany, rest of Europe, North America, Latin America, Asia, Australia, New Zealand, the Middle East, and Africa.

• Resource-efficient kitchen technology is gaining traction as rising energy and water costs, paired with new sustainability priorities, compel the foodservice industry to modernize; RATIONAL's proven ability to deliver significant energy and water savings, as validated by independent studies, positions it to outperform as customers upgrade equipment-driving revenue growth and improving gross margins.
  
• Labor shortages and wage inflation remain persistent in hospitality, sharply increasing demand for automation-enabled, ergonomic, and skill-independent kitchen solutions; RATIONAL's digital, AI-powered product lines and connected platforms (e.g., iCombi, iVario, Connected Cooking) directly address these pain points, supporting higher average selling prices and recurring service/software revenues, thus strengthening both topline and margins.
  
• Expansion initiatives in underpenetrated emerging markets, particularly with the new production facility and tailored product launches planned in China ("Road to China"), provide a powerful catalyst for accelerating market share gains, geographic diversification, and future revenue stability-especially as Asian demand recovers and new, more affordable products come online.
  
• Consistent investment in R&D and expanded salesforce is already yielding higher customer contacts and order growth, with a short payback period for sales investment; as this network matures further, especially outside Western Europe, revenue growth is likely to re-accelerate towards high single digits and drive sustainable earnings expansion.
  
• Ongoing industry shift toward multi-functional, space-saving appliances-supported by RATIONAL's recent launches and innovation pipeline (iHexagon, next-gen combi ovens, etc.)-is set to capture increasing replacement and first-time adoption demand, improving both revenue growth and premium product mix, which will positively impact gross margin and long-term earnings.

RATIONAL Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming RATIONAL's revenue will grow by 7.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 20.8% today to 20.4% in 3 years time.
• Analysts expect earnings to reach €305.2 million (and earnings per share of €26.72) by about August 2028, up from €253.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.8x on those 2028 earnings, up from 28.9x today. This future PE is greater than the current PE for the GB Machinery industry at 19.3x.
• 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 5.78%, as per the Simply Wall St company report.

RATIONAL Future Earnings Per Share Growth

Risks

• The implementation of U.S. tariffs (rising from 10% to 15% on cooking equipment and 50% on steel products) introduces material cost pressure and pricing uncertainty in RATIONAL's largest growth market; management has not decided whether these cost increases can be passed on, risking margin compression or weakening demand and ultimately challenging revenue and net margin growth.
  
• Asia, one of RATIONAL's most promising long-term growth regions, saw a year-on-year decline of 11% in Q2 sales, largely due to overreliance on one major key account and volatile ordering patterns; this exposes the company to concentration risk and potential underperformance in a region targeted for expansion, impacting revenue and earnings stability.
  
• Management continues to emphasize "healthy" rather than accelerated growth and notes that penetration of advanced kitchen systems remains modest (only ~200,000 new customers over 10 years from a 4.8 million potential customer base); RATIONAL's deliberate pace and conservative approach could limit top-line growth in a competitive, fast-changing market, constraining long-term revenue expansion.
  
• Intensifying competition-including new local manufacturing moves by rivals like Unox in the U.S.-could erode RATIONAL's market share, compress pricing, and pressure margins, especially if global trends toward localization and nearshoring accelerate, leading to higher R&D and operating costs with potential adverse effects on profitability.
  
• Stalling or slowing growth rates in core products (notably iVario growth slowing below expectations and spare parts up only 5%) alongside rising operating expenses (notably R&D up 18.5% and sales/service costs up 6%) may result in diminishing operating leverage, and the company's EBIT margin guidance has already shifted to the lower end of its target range (25–26%), signaling future risks to earnings and cash flow.

Valuation

• The analysts have a consensus price target of €744.929 for RATIONAL 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 €1020.0, and the most bearish reporting a price target of just €565.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.5 billion, earnings will come to €305.2 million, and it would be trading on a PE ratio of 31.8x, assuming you use a discount rate of 5.8%.
• Given the current share price of €644.0, the analyst price target of €744.93 is 13.5% 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.