Surgical And Robotic Simulation Will Improve Patient Safety

Key Takeaways

• Rising global demand, regulatory support, and low market penetration drive strong growth prospects and recurring revenue opportunities in surgical simulation solutions.
  
• SaaS adoption, expanded partnerships, AI-driven features, and operational efficiencies are expected to boost margins and increase long-term profitability.
  
• Mounting macroeconomic pressures, customer concentration risk, margin erosion, trade barriers, and rising competition threaten sales predictability, profitability, and long-term revenue stability.

Catalysts

Develops and markets virtual reality simulators for evidence-based medical training in Europe, North and South America, Asia, and internationally.

• Growing global demand for surgical and robotic training-driven by an aging population, rising chronic disease burden, and ongoing expansion in robotic-assisted/minimally invasive procedures-supports a significantly larger market for Surgical Science's simulation solutions, with low current market penetration and strong expected impact on future revenue growth.
  
• Heightened regulatory focus on patient safety and increasing mandates for simulation-based training are expected to accelerate adoption across hospitals and healthcare institutions, driving both direct sales and recurring licensing revenues while underpinning long-term revenue visibility.
  
• Expansion of proprietary simulation content, integration of AI-driven features, and partnership growth with both established and emerging medical device and robotics companies position Surgical Science to benefit from higher-margin, recurring licensing agreements-potentially boosting both revenue and net margins over time.
  
• Ongoing transition by OEM and healthcare customers toward subscription-based, cloud-enabled, and virtual training environments is likely to support higher recurring revenue streams and improved operating margins, as seen in the company's SaaS licensing and service contracts.
  
• Operational initiatives such as the launch of the PartnerPath distributor program, improvement in production/shipping efficiency, and realization of cost synergies from the Intelligent Ultrasound acquisition are expected to drive gross margin expansion and operating leverage, positively affecting near
• and long-term earnings.

Surgical Science Sweden Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Surgical Science Sweden's revenue will grow by 20.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.8% today to 29.2% in 3 years time.
• Analysts expect earnings to reach SEK 479.8 million (and earnings per share of SEK 9.4) by about August 2028, up from SEK 92.4 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 20.4x on those 2028 earnings, down from 55.2x today. This future PE is lower than the current PE for the SE Medical Equipment industry at 53.4x.
• 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 5.54%, as per the Simply Wall St company report.

Surgical Science Sweden Future Earnings Per Share Growth

Risks

• Sales in key international markets, particularly the U.S. and China, are being negatively impacted by macroeconomic pressures, procurement budget constraints, customer hesitancy, tariffs, and anticorruption campaigns, which could lead to prolonged sales cycles, increased backlog volatility, and ultimately lower near-term and potentially long-term revenue growth.
  
• High dependency on a handful of large OEM customers (such as Intuitive) exposes Surgical Science Sweden to concentration risk; delays in new customer product launches, platform transitions, and lower-than-expected subscription renewals could lead to lumpier, less predictable revenue, especially impacting higher-margin license income and overall earnings stability.
  
• Persistent erosion of gross margins, driven by a less favorable product/revenue mix (lower license sales, weaker U.S. direct sales, and inclusion of lower-margin acquisitions like Intelligent Ultrasound), suggests increased pressure on profitability; recent trends of OpEx growth outpacing sales add additional risk to net margins and future EPS improvement goals.
  
• Escalating global trade barriers, currency fluctuations (notably, recent SEK 24–25 million negative impact and ongoing foreign currency exposures), and increased compliance costs tied to tariffs and regulatory changes may add unpredictability to both top and bottom line financials, making future earnings less certain.
  
• Intensifying competition in the rapidly evolving surgical simulation and medtech markets, coupled with the risk that customers or large OEM partners may attempt to develop their own simulation technologies or choose alternative suppliers, could erode Surgical Science Sweden's pricing power, slow revenue growth, and compress margins over the long term.

Valuation

• The analysts have a consensus price target of SEK163.0 for Surgical Science Sweden 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 SEK185.0, and the most bearish reporting a price target of just SEK120.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK1.6 billion, earnings will come to SEK479.8 million, and it would be trading on a PE ratio of 20.4x, assuming you use a discount rate of 5.5%.
  
• Given the current share price of SEK100.0, the analyst price target of SEK163.0 is 38.7% 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.