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Lasit's European Expansion And New Medical Devices Will Strengthen Future Prospects

WA
Consensus Narrative from 3 Analysts

Published

February 10 2025

Updated

February 10 2025

Key Takeaways

  • Divesting laser cutting units to focus on high-margin medical devices could enhance revenue growth and profitability.
  • Effective cost management and market diversification efforts are likely to boost net margins and drive future revenue growth.
  • Weak performance in key markets and sectors, along with economic challenges, may hinder future growth and profitability for EL.En.

Catalysts

About EL.En
    Engages in the research, development, production, sale, and distribution of laser solutions in Italy, rest of Europe, and internationally.
What are the underlying business or industry changes driving this perspective?
  • The strategic decision to divest EL.En's laser cutting units is expected to realign the company as primarily a medical device provider. This move could potentially enhance future revenue growth and profitability by focusing investments and resources on high-margin medical sectors.
  • The improvements in EBIT from the industrial sector, despite a revenue decrease, suggest effective cost management and profitability enhancement efforts that are expected to positively influence net margins moving forward.
  • The expansion in international markets, particularly with the increased sales in Europe and the U.S. for industrial products, could drive future revenue growth and improve geographic diversification in earnings.
  • Continuous product innovation in medical devices, including new launches in aesthetic and surgical domains, signifies potential future revenue streams and the ability to maintain a competitive edge in high-margin markets.
  • The establishment of additional subsidiaries across Europe for the Lasit laser marking business aims to lever growth opportunities, likely contributing positively to revenue growth and improving overall group profitability through geographical diversification.

EL.En Earnings and Revenue Growth

EL.En Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming EL.En's revenue will grow by 6.6% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 7.7% today to 8.4% in 3 years time.
  • Analysts expect earnings to reach €67.6 million (and earnings per share of €0.8) by about February 2028, up from €51.2 million today.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.0x on those 2028 earnings, up from 16.2x today. This future PE is greater than the current PE for the GB Medical Equipment industry at 13.0x.
  • Analysts expect the number of shares outstanding to grow by 0.23% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 9.27%, as per the Simply Wall St company report.

EL.En Future Earnings Per Share Growth

EL.En Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The U.S. market for medical devices underperformed expectations, which could negatively affect the company's future revenue growth prospects.
  • The industrial sector faced a significant drop in revenue, particularly in the Italian market due to unfavorable economic conditions, potentially impacting net margins in this sector.
  • The Chinese market experienced a weak performance with a substantial 33% decline in revenues, which can adversely affect earnings from that region.
  • Lasit's profitability was lower than expected due to project delays and a weak Italian market, which could strain future profit margins.
  • High interest rates and geopolitical unrest are dampening the medical market, potentially leading to decreased earnings from capital equipment sales.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of €13.6 for EL.En based on their expectations of its future earnings growth, profit margins and other risk factors.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €806.2 million, earnings will come to €67.6 million, and it would be trading on a PE ratio of 21.0x, assuming you use a discount rate of 9.3%.
  • Given the current share price of €10.34, the analyst price target of €13.6 is 24.0% 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.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Read more narratives

Fair Value
€13.6
20.1% undervalued intrinsic discount
Analyst Price Target Fair Value
Future estimation in
PastFuture0806m2014201720202023202520262028Revenue €806.2mEarnings €67.6m
% p.a.
Decrease
Increase
Current revenue growth rate
6.66%
Medical Equipment revenue growth rate
0.33%