Overvaluation Will Challenge Margins While Additive Manufacturing Markets Expand

Key Takeaways

• High expectations for growth and margin expansion are fueled by new industrial verticals, Asian partnerships, and demand for eco-efficient manufacturing.
  
• Investors may be overestimating Freemelt's ability to deliver sustained high-margin innovation and leverage its technological leadership across integrated product and service offerings.
  
• Rapid sales growth, strategic global partnerships, scalable manufacturing, and rising recurring revenues position Freemelt for sustained expansion and margin improvement amid favorable industry trends.

Catalysts

Engages in the metal 3D-printing business in Europe and North America.

• Investors are likely pricing in sustained, above-trend revenue growth driven by Freemelt's breakthrough entry into high-growth industrial verticals (defense, fusion energy, medtech) and rapid adoption in the Chinese market-expecting these factors to significantly increase both the number and value of future orders.
  
• The company's shift to outsourced manufacturing and partnerships in Asia are viewed as catalysts for improved scalability, operating leverage, and higher net margins over time, as fixed costs are spread over greater volumes and supply chains become more efficient.
  
• Expectations for long-term, recurring aftermarket and services revenue are being amplified as Freemelt's installed base grows, with investors projecting a higher-margin, more stable earnings stream alongside initial machine sales.
  
• The secular shift toward advanced, eco-efficient manufacturing and the global push for sustainability in energy and medtech are presumed to bolster demand for Freemelt's modular electron beam 3D printing, supporting robust revenue growth and margin expansion.
  
• Investors may be embedding outsized assumptions for future innovation-led earnings uplift, based on Freemelt's positioning as a technological leader in open-source, modular systems for complex materials-potentially overestimating the company's ability to capture higher-margin, vertically integrated opportunities across software and proprietary materials.

Freemelt Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Freemelt Holding's revenue will grow by 50.3% annually over the next 3 years.
• Analysts are not forecasting that Freemelt Holding will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Freemelt Holding's profit margin will increase from -142.9% to the average SE Machinery industry of 11.0% in 3 years.
• If Freemelt Holding's profit margin were to converge on the industry average, you could expect earnings to reach SEK 22.1 million (and earnings per share of SEK 0.1) by about August 2028, up from SEK -84.1 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 29.3x on those 2028 earnings, up from -6.5x today. This future PE is greater than the current PE for the SE Machinery industry at 23.8x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.96%, as per the Simply Wall St company report.

Freemelt Holding Future Earnings Per Share Growth

Risks

• Freemelt is experiencing record sales growth, with Q2 2025 sales equaling the entire previous year, combined with a rapidly rising order intake and strong order book-indicating robust top-line revenue expansion potentially contradicting expectations of a declining share price.
  
• Strategic expansion into China, the world's fastest-growing additive manufacturing market, through a major partnership with Jiuli, alongside increased penetration in high-growth sectors (defense, energy, medtech), positions Freemelt to capture share in expanding markets and grow future revenues.
  
• Outsourcing manufacturing to Scanfil is expected to substantially improve production scalability, optimize net working capital, and free up resources for higher-margin activities such as R&D, aftermarket services, and customer support-supporting improved margins and long-term earnings.
  
• A diversified and expanding installed base (39 machines and growing) establishes recurring aftermarket revenue streams and a foundation for future growth, likely contributing to improving gross margins and earnings stability over time.
  
• Global secular trends-including accelerating adoption of additive manufacturing for serial production, especially in orthopedic implants, and increased government and industry investment in advanced/high-performance manufacturing-support long-term industry tailwinds that can drive sustained revenue and margin growth for Freemelt.

Valuation

• The analysts have a consensus price target of SEK2.35 for Freemelt Holding 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 SEK3.0, and the most bearish reporting a price target of just SEK1.7.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK200.0 million, earnings will come to SEK22.1 million, and it would be trading on a PE ratio of 29.3x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of SEK2.89, the analyst price target of SEK2.35 is 23.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.