IVF Technology Adoption And Genetic Testing Demand Will Drive Strong Long-Term Upside

Catalysts

About Vitrolife

Vitrolife develops and supplies advanced IVF media, consumables, technologies, and genetic testing solutions that support clinics across the full reproductive care workflow.

What are the underlying business or industry changes driving this perspective?

• Accelerating adoption of EmbryoScope time lapse systems and integrated witnessing and lab control solutions in Americas and EMEA, supported by a robust sales pipeline and longer-term contracts, should drive high-margin technology revenue growth and improved EBITDA.
• Growing demand for advanced genetic testing, including PGT-A, PGT-M and fast-growing noninvasive solutions such as Embrace, combined with a shift toward more differentiated, premium tests, is expected to support mix-driven expansion of gross margin and earnings.
• Rising IVF treatment accessibility in key markets through improved reimbursement schemes and evolving fertility coverage options in the United States is likely to gradually lift global cycle volumes, supporting sustained top line growth and operating leverage.
• Ongoing automation investments in manufacturing and targeted IT and digitalization initiatives across the organization are poised to raise capacity and efficiency in core growth platforms, underpinning structurally stronger net margins over time.
• Geographically balanced exposure, with solid share gains in Americas and resilient positions across EMEA and the wider APAC region outside China, reduces earnings volatility and positions Vitrolife to translate future regional recoveries into higher revenue and cash flow.

Assumptions

This narrative explores a more optimistic perspective on Vitrolife compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Vitrolife's revenue will grow by 7.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.5% today to 21.0% in 3 years time.
• The bullish analysts expect earnings to reach SEK 922.4 million (and earnings per share of SEK 6.81) by about December 2028, up from SEK 440.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK789.7 million.
• 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 39.4x on those 2028 earnings, down from 42.6x today. This future PE is greater than the current PE for the GB Biotechs industry at 31.3x.
• The bullish 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 5.31%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent macroeconomic and geopolitical headwinds in key IVF markets, including a structurally weaker consumer environment in China and ongoing instability in the Middle East, could keep cycle volumes subdued for longer than expected. This could limit top line growth and delay operating leverage, weighing on revenue and earnings growth.
• Currency fluctuations, particularly a structurally stronger SEK against the U.S. dollar and euro, are already reducing reported sales and squeezing profitability despite stable underlying demand. If this trend persists, it could structurally cap reported revenue growth and compress net margins and earnings per share.
• Vitrolife’s current share gains in consumables and technologies are partly supported by competitor restructuring and elevated commercial investments. If competitors respond more aggressively or the company is forced to normalize spending, the pace of share gains could slow, reducing volume and mix benefits and limiting gross margin expansion and earnings growth.
• The APAC region relies on offsetting weakness in China with growth in other markets that can be lower priced and more competitive, such as India. If price pressure intensifies or mix shifts further toward lower margin geographies and products, this could erode the regional contribution margin and drag on group gross margin and EBITDA.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Vitrolife is SEK230.0, which represents up to two standard deviations above the consensus price target of SEK193.5. This valuation is based on what can be assumed as the expectations of Vitrolife'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 SEK230.0, and the most bearish reporting a price target of just SEK160.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be SEK4.4 billion, earnings will come to SEK922.4 million, and it would be trading on a PE ratio of 39.4x, assuming you use a discount rate of 5.3%.
  
• Given the current share price of SEK138.4, the analyst price target of SEK230.0 is 39.8% 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.