Adaptive Radiotherapy And AI Convergence Will Expand Emerging Markets

Key Takeaways

• Rapid adoption of advanced platforms and strong momentum in underserved regions position Elekta for outsized revenue growth and improved profit margins.
  
• Leadership in precision radiotherapy technologies and digital health creates high-margin, recurring revenues and raises barriers to entry for competitors.
  
• Mounting market, currency, and cost pressures, plus concentrated regional and product bets, threaten Elekta's margins, innovation, revenue stability, and long-term competitive position.

Catalysts

A medical technology company, provides clinical solutions for treating cancer and brain disorders in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• While analyst consensus highlights strong order growth and high book-to-bill ratios as drivers of future sales, order momentum in EMEA and China is likely understated-leading indicators in these key geographies suggest Elekta could deliver much higher revenue acceleration in the medium term as backlogs convert rapidly and underserved markets rebound more forcefully than expected.
  
• Analysts broadly agree that the uptake of Elekta Evo and Elekta ONE is driving growth, but the magnitude of commercial success is materially underestimated-rapid adoption in Europe and strong evidence of clinical differentiation position these platforms to gain disproportionate share globally, supporting not just top-line growth but also a sharp, sustained step-up in gross margins as advanced software and adaptive solutions become a larger share of sales.
  
• Elekta's leadership in MRI-guided adaptive radiotherapy (Unity platform) is coinciding with the accelerated global shift toward value-based, precision healthcare, positioning the company to capture premium pricing and long-term recurring software and service revenues at margins well above current levels, fueling multi-year expansion in both operating margins and earnings quality.
  
• Electrification of oncology informatics, AI integration, and the company's growing digital health ecosystem put Elekta at the forefront of a technology convergence in radiotherapy-enabling sticky, high-margin recurring revenue streams from treatment planning and data management, and creating an installed base network effect that raises barriers to entry, further strengthening margin and cash-flow durability.
  
• As healthcare infrastructure investment accelerates across major emerging markets, Elekta's unmatched local presence, first-mover advantage, and regulatory head start (e.g., recent China momentum) provide a distinctive platform to dramatically outgrow global peers in total addressable market expansion, leading to sustained, above-industry revenue CAGR over the next decade.

Elekta Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Elekta compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Elekta's revenue will grow by 7.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.5% today to 9.5% in 3 years time.
• The bullish analysts expect earnings to reach SEK 2.1 billion (and earnings per share of SEK 5.55) by about September 2028, up from SEK 274.0 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 18.8x on those 2028 earnings, down from 64.3x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 50.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.36%, as per the Simply Wall St company report.

Elekta Future Earnings Per Share Growth

Risks

• Prolonged weakness in Elekta's key markets of the United States and China is creating revenue headwinds, with order intake in China below pre-pandemic levels due to anti-corruption campaigns and a slow backlog recovery, which threatens future sales growth and earnings momentum.
  
• Ongoing and potentially escalating tariffs, particularly in the U.S. where about 21 percent of sales are exposed, are compressing gross margins and reducing net profitability, with management stating that the adverse margin impact will persist at current levels for at least several quarters.
  
• Currency headwinds, specifically the strengthening of the Swedish krona against key revenue currencies, are reducing revenues and earnings when translated to SEK, and while the currency headwind may ease over time, it has already negatively affected gross and EBIT margins in the near term.
  
• Higher net research and development costs, paired with a decline in gross R&D investment and an increased percentage of amortization relative to sales, may signal reduced future innovation capability, potentially weakening Elekta's competitive position and limiting future revenue opportunities.
  
• Increasing reliance on strong performance from the EMEA region and newly launched products (Elekta Evo and Elekta ONE) introduces concentration risk, especially given that capital equipment and software sales are lumpy and potentially cyclical, which may drive volatility and unpredictability in revenue and cash flow going forward.

Valuation

• The assumed bullish price target for Elekta is SEK86.58, which represents two standard deviations above the consensus price target of SEK53.79. This valuation is based on what can be assumed as the expectations of Elekta'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 SEK108.0, and the most bearish reporting a price target of just SEK34.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SEK22.4 billion, earnings will come to SEK2.1 billion, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 6.4%.
• Given the current share price of SEK46.14, the bullish analyst price target of SEK86.58 is 46.7% 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.