Aging Population And AI Integration Will Expand Oncology Market

Key Takeaways

• Expanding global demand and AI-driven product enhancements position RaySearch for sustained growth, increased recurring revenues, and greater market visibility.
  
• Strategic upselling, legacy system replacements, and global partnerships are set to boost margins, expand the installed base, and drive long-term earnings.
  
• Heightened regulatory compliance, competitive pressures, and reliance on key customer transitions could increase costs, reduce profitability, and introduce greater revenue and earnings volatility.

Catalysts

A medical technology company, provides software solutions for cancer treatment worldwide.

• The rapidly aging global population and rising cancer incidence are fundamentally expanding RaySearch's addressable market, and the company's validated leadership in advanced, individualized treatment planning (e.g., BNCT used at Helsinki and adoption in new centers) positions it for sustainable top-line growth.
  
• There is strong evidence of accelerating adoption of AI-driven and integrated oncology software by hospitals/purchasers, with RaySearch's continuous RayStation and RayCare enhancements (notably new AI features, support for TrueBeam, and improved interoperability) likely to boost recurring license and support revenues and enhance revenue visibility.
  
• The replacement of legacy systems like Pinnacle, with 400-500 clinics globally still unconverted, creates a clear medium-term revenue catalyst, as RaySearch's focused sales push increases its installed base and cross-sell potential before the 2026 EOL deadline.
  
• The company is shifting its commercial strategy towards more aggressive upselling of software modules and licenses within the existing installed base-an area with significant untapped potential-which should drive high-margin incremental revenue and improve net margins given the low selling costs associated with this channel.
  
• Strategic partnerships with new device manufacturers (e.g., Hitachi, Neutron Therapeutics) and continued global expansion into new outpatient centers and markets will broaden RaySearch's ecosystem reach, open new distribution channels, and support sustainable earnings growth.

RaySearch Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming RaySearch Laboratories's revenue will grow by 15.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.4% today to 22.7% in 3 years time.
• Analysts expect earnings to reach SEK 433.5 million (and earnings per share of SEK 12.63) by about August 2028, up from SEK 193.0 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 32.0x on those 2028 earnings, down from 48.9x today. This future PE is lower than the current PE for the GB Healthcare Services industry at 84.0x.
• 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 5.95%, as per the Simply Wall St company report.

RaySearch Laboratories Future Earnings Per Share Growth

Risks

• Increased regulatory scrutiny and evolving data privacy requirements, especially in the EU and US, could impose higher ongoing compliance costs and introduce delays in market adoption for RaySearch's software, potentially pressuring both revenue growth and net margins in the long-term.
  
• Heavy near-term reliance on converting Pinnacle customers, a time-limited opportunity, risks creating a revenue gap or growth slowdown once these conversions are largely completed, which could weaken sales momentum and stall top-line growth in late 2026 and beyond.
  
• Accelerating R&D and incremental hiring to remain competitive and expand the installed base raises the risk that cost increases may outpace revenue growth, potentially dampening operating margins and constraining earnings expansion if new customer or module sales ramp more slowly than anticipated.
  
• Increased competition from major healthcare IT providers offering end-to-end, integrated oncology platforms, as well as from open-source and cloud-based solutions, may commoditize key aspects of RaySearch's product suite, leading to greater pricing pressure and lost market share, negatively impacting future revenues and profitability.
  
• Fluctuations in quarterly order timing and customer payment schedules, as seen in recent delays, alongside the company's high concentration on large hospital clients, can create significant variability in working capital, revenue recognition and cash flow, reducing financial predictability and potentially leading to periods of earnings volatility.

Valuation

• The analysts have a consensus price target of SEK343.333 for RaySearch Laboratories 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 SEK370.0, and the most bearish reporting a price target of just SEK300.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK1.9 billion, earnings will come to SEK433.5 million, and it would be trading on a PE ratio of 32.0x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of SEK275.0, the analyst price target of SEK343.33 is 19.9% 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.