Accelerating Laser Adoption Will Spur Expansion Despite Tariff Risks

Key Takeaways

• Margin expansion and accelerated profit growth expected as operational streamlining and discontinued operations boost earnings, outpacing analyst expectations.
  
• Market leadership in innovative medical lasers, along with vertical integration and emerging market growth, positions the company for sustained, above-market revenue gains.
  
• Over-reliance on key international markets amid rising geopolitical risks, currency volatility, and intensifying competition threatens margin stability and long-term profitability.

Catalysts

Engages in the research, development, production, sale, and distribution of laser solutions in Italy, rest of Europe, and internationally.

• Analyst consensus expects operational streamlining and focus post-China divestment to simply improve margins, but with the exit near completion and substantial profitability drag from discontinued operations removed, El.En could see a sharper positive inflection in both EBIT and net income beginning in the second half of 2025, setting up multi-year margin expansion well above current market assumptions.
  
• While analysts broadly recognize EL.En's innovation and new medical product launches as growth levers, they may be underestimating the potential for a step-change in revenue growth and gross margin as the doubling of Quanta System's sterile fiber capacity and the success of high-margin, globally recognized brands (like CoolPeel and RedTouch PRO) position the company to outpace sector demand amid surging adoption of anti-aging and laser therapies.
  
• EL.En's recent industrial automation acquisition and expanded production footprint, together with the rebound in European and Italian capital equipment demand, create a flywheel effect for its industrial laser business; this vertical integration could accelerate growth and structurally improve gross and EBITDA margins, far beyond cyclical recovery.
  
• The company is uniquely placed to capture the rising wave of elective, self-pay medical and aesthetic procedures throughout emerging markets, thanks to its broad product portfolio and ongoing distribution expansion, unlocking new recurring revenue streams and driving long-term, above-market top-line growth.
  
• Ongoing heavy investment in R&D and a leadership role in next-generation digital and AI-enabled laser platforms position EL.En to achieve industry-leading pricing power and market share, making future revenue and earnings growth more resilient and less sensitive to global economic cycles than consensus models currently reflect.

EL.En Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on EL.En compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming EL.En's revenue will grow by 6.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 10.8% today to 10.3% in 3 years time.
• The bullish analysts expect earnings to reach €71.7 million (and earnings per share of €nan) by about July 2028, up from €62.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, up from 15.4x today. This future PE is greater than the current PE for the GB Medical Equipment industry at 19.9x.
• Analysts expect the number of shares outstanding to grow by 0.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.82%, as per the Simply Wall St company report.

EL.En Future Earnings Per Share Growth

Risks

• El.En.'s exposure to rising geopolitical tensions and protectionist policies, particularly ongoing U.S. tariff threats and instability in international trade, risks significant supply chain disruption and increased costs, which could negatively impact both revenues and operating margins if tariffs escalate to 20 percent as management warns.
  
• Weakness in key international subsidiaries, especially the Chinese business where revenues dropped by about 20 percent and profitability remains negative, as well as the ongoing losses and now deconsolidation of Withus in Japan, highlight the company's over-reliance on a few major markets and suggest heightened earnings volatility if these issues persist.
  
• The company faces sustained risks from currency fluctuations, as seen with recent negative impacts from the Japanese yen and the U.S. dollar, which could further pressure net margins and EBIT if foreign exchange rates move unfavorably, particularly given El.En.'s high degree of international exposure.
  
• Increasing competition from lower-cost Asian manufacturers, ongoing commoditization in laser-based medical equipment, and declining demand in segments such as international hair removal threaten to compress EL.En.'s pricing power and erode both revenue growth and profitability over the long term.
  
• High capital requirements for R&D, automation, and capacity expansion-such as doubling fiber production-risk misallocation if new products do not achieve sufficient market traction or if regulatory requirements for medical devices tighten, potentially leading to higher compliance and development costs that would pressure operating margins and future earnings.

Valuation

• The assumed bullish price target for EL.En is €14.7, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of EL.En's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €14.7, and the most bearish reporting a price target of just €11.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €693.3 million, earnings will come to €71.7 million, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 9.8%.
• Given the current share price of €11.98, the bullish analyst price target of €14.7 is 18.5% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• 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.