Global Expansion And SGRT Demand Will Drive Future Success

Key Takeaways

• Strategic global expansion, particularly in APAC, and long-term contracts in advanced markets support revenue growth and market share increase.
  
• Strong order backlog and investment in innovation and SGRT position C-RAD for revenue acceleration and long-term profitability.
  
• Continued macroeconomic challenges and regional dependencies threaten revenue stability and profitability, while increased operational expenses could pressure short-term margins.

Catalysts

Develops, manufactures, and sells products and systems with applications in radiotherapy for the treatment of cancer in Europe, the Middle East, Africa, the America, and the Asia Pacific.

• C-RAD's ongoing global expansion, particularly by broadening its base in the APAC region and capturing untapped potential in both advanced and developing markets, suggests potential for increased future revenue and market share growth.
  
• The company's strategic focus on securing long-term service contracts in advanced European markets and the emphasis on U.S. market expansion, especially through partnerships with Varian linacs, positions C-RAD for improved and stable revenue streams and may support higher net margins as service-based income typically carries higher margins.
  
• The solid order backlog, highlighted by an increase in Q4, indicates strong future sales potential and revenue growth, as these orders are fulfilled in subsequent quarters, potentially leading to improved earnings.
  
• The company's emphasis on investing in product innovation and expanding its sales and delivery organization to capitalize on the growing demand for Surface Guided Radiation Therapy (SGRT) suggests an opportunity for revenue acceleration and sustained long-term profitability.
  
• C-RAD's strong financial position, characterized by no long-term debt and a robust cash balance, provides flexibility for strategic investments and potential operational efficiency improvements that could support higher EBIT margins and earnings growth in the future.

C-Rad Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming C-Rad's revenue will grow by 15.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.0% today to 19.2% in 3 years time.
• Analysts expect earnings to reach SEK 139.8 million (and earnings per share of SEK 4.15) by about February 2028, up from SEK 56.5 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 12.9x on those 2028 earnings, down from 18.7x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 34.1x.
• Analysts expect the number of shares outstanding to grow by 0.11% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.1%, as per the Simply Wall St company report.

C-Rad Future Earnings Per Share Growth

Risks

• The continued macroeconomic challenges, especially in key regions like EMEA and Germany, could negatively impact order intake and revenue growth, resulting in a decline in earnings and profit margins.
  
• The cancellation of orders totaling SEK 15 million in the quarter indicates potential volatility and unpredictability in order fulfillment, which could lead to decreased revenue and affect the company's financial stability.
  
• Slower backlog conversion and installation delays in the Americas have already impacted revenue negatively and, if persistent, could further strain revenue and earnings growth.
  
• The allocation of increased resources towards sales and R&D (FTEs), while essential for long-term growth, could increase operational expenses and pressure net margins in the short term.
  
• The company is heavily reliant on the APAC region for recent revenue growth, and any changes in market dynamics or regional demand could result in significant revenue fluctuations, affecting overall stability and profitability.

Valuation

• The analysts have a consensus price target of SEK47.0 for C-Rad 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 SEK729.1 million, earnings will come to SEK139.8 million, and it would be trading on a PE ratio of 12.9x, assuming you use a discount rate of 5.1%.
  
• Given the current share price of SEK31.4, the analyst price target of SEK47.0 is 33.2% 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.