Defense Agreements With US And Netherlands Will Drive Expansion Opportunities

Key Takeaways

• Rising defense budgets and modernization initiatives are driving demand for Invisio's innovative communication and hearing protection products, supporting revenue expansion and margin stability.
  
• Diversification into new markets, increased R&D investment, and a strong order book enhance earnings visibility and reduce revenue volatility.
  
• Heavy reliance on unpredictable large orders, rising costs, and increasing competitive pressures threaten revenue stability, margin strength, and timely realization of key growth opportunities.

Catalysts

Develops and sells communication and hearing protection systems for professionals in the defense, law enforcement, and security sectors in Sweden, the United Kingdom, Denmark, rest of Europe, the United States, and internationally.

• Substantial increases in defense spending across Europe and North America, reinforced by NATO's 5% GDP target and initiatives like European Defense Readiness 2030, are expected to accelerate procurement cycles and drive significant growth in Invisio's addressable market from late 2025 onward-likely translating to stronger order intake and revenue growth.
  
• Ongoing soldier modernization and digitization programs are fueling demand for integrated communication and hearing protection systems; Invisio's rapid pace of product innovation (e.g., the X7 in-ear headset, Intercom Link, and recent UltraLYNX acquisition) positions the company to capture a larger share of upcoming multi-year upgrade cycles, supporting future revenue expansion and margin stability.
  
• Heightened regulatory and operational focus on hearing protection and occupational safety for military and first responders continues to build long-term, recurring demand for Invisio's solutions, providing a stable foundation for sustained revenue growth, particularly as regulatory mandates tighten.
  
• Strategic investments in R&D, expanded sales headcount, and product portfolio diversification (expanding into law enforcement and fire & rescue) are expected to enhance market penetration, diversify revenue sources, and improve operating leverage; these factors support higher EBIT margins and reduced earnings volatility over time.
  
• Invisio's strong and growing order book-underpinned by both new large customers and broader product adoption among existing accounts-signals durable customer relationships and increasing upsell opportunities, laying the groundwork for higher recurring revenue and improved long-term earnings visibility.

Invisio Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Invisio's revenue will grow by 19.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.8% today to 21.0% in 3 years time.
• Analysts expect earnings to reach SEK 610.6 million (and earnings per share of SEK 11.27) by about September 2028, up from SEK 252.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK682 million in earnings, and the most bearish expecting SEK394 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.6x on those 2028 earnings, down from 55.6x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 53.4x.
• Analysts expect the number of shares outstanding to grow by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.65%, as per the Simply Wall St company report.

Invisio Future Earnings Per Share Growth

Risks

• INVISIO's reliance on large government and institutional orders, paired with customer purchase timing outside of its control, leads to revenue lumpiness and unpredictability, introducing higher volatility in earnings and making long-term financial forecasts less reliable.
  
• Currency fluctuations (notably the strengthened Swedish krona against both the USD and GBP) and ongoing or potential future tariffs (especially relating to U.S. and EU negotiations) have negatively impacted gross margins and may continue to do so, putting sustained pressure on net margins and profitability.
  
• OpEx has risen substantially (25% YOY in the most recent period), primarily due to acquisitions, R&D, and sales force expansion; if revenue growth does not keep pace, it could erode operating margins and diminish earnings leverage.
  
• INVISIO faces competitive risks from larger defense industry suppliers and emerging tech companies investing in integrated, multifunctional platforms; this could threaten INVISIO's market share and put pressure on future revenue growth and overall margins.
  
• Long lead times and procurement cycles for major defense platforms (such as military vehicles) mean that key growth drivers may not materialize until 2026 or later, leading to potential growth delays and slower realization of forecasted revenue expansion.

Valuation

• The analysts have a consensus price target of SEK370.0 for Invisio 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 SEK425.0, and the most bearish reporting a price target of just SEK310.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK2.9 billion, earnings will come to SEK610.6 million, and it would be trading on a PE ratio of 33.6x, assuming you use a discount rate of 5.6%.
• Given the current share price of SEK308.0, the analyst price target of SEK370.0 is 16.8% 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.