Digital And Contactless Payments Will Drive Secure Cash Management Worldwide

Key Takeaways

• Expanding digital payments and rising regulatory demands are fueling resilient demand for NOTE's secure transaction and authentication solutions, supporting strong revenue momentum.
  
• Advanced automation and a shift to software-based, recurring revenue streams are enabling industry-leading margins and setting the stage for sustainable outperformance.
  
• Reliance on major customers, pricing pressures, regulatory costs, and geopolitical risks threaten NOTE's margins, growth prospects, and financial flexibility amid weak demand.

Catalysts

Provides electronics manufacturing services in Sweden, Finland, the United Kingdom, Bulgaria, Estonia, China, and internationally.

• Analyst consensus expects NOTE to benefit moderately from digital transformation, but surging global adoption of digital and contactless payments-especially in underbanked and emerging markets-could trigger a much sharper, longer-lasting step-up in demand for NOTE's secure transaction and authentication systems, materially accelerating revenue growth beyond expectations.
  
• While analysts broadly anticipate gradual margin gains from automation and efficiency, NOTE's rapid investment in advanced automated processes and persistent cost optimization (even in lower-cost geographies) is already producing industry-leading net margins that could expand further as software and SaaS-based revenue rises, enabling sustainable earnings outperformance.
  
• The transition of NOTE's business model towards higher-value, recurring software and digital cash management solutions is still in early innings, presenting significant untapped upside for predictable, high-margin revenue streams that can drive both top-line growth and robust margin expansion.
  
• Increasing regulatory scrutiny and new mandates globally around anti-money laundering and cash authentication are poised to boost mandatory investment in NOTE's solutions from existing banks and retail customers, supporting resilient revenue growth and improving contract win rates.
  
• The sharp rebound in order backlog, coupled with exceptional delivery and quality metrics following years of operational investment, positions NOTE for accelerated sales conversion as macro headwinds recede, paving the way for meaningful revenue and earnings surprises over the next several quarters.

NOTE Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on NOTE compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming NOTE's revenue will grow by 10.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.7% today to 7.9% in 3 years time.
• The bullish analysts expect earnings to reach SEK 404.4 million (and earnings per share of SEK 14.22) by about July 2028, up from SEK 257.0 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 16.9x on those 2028 earnings, down from 21.7x today. This future PE is lower than the current PE for the GB Electronic industry at 27.9x.
• Analysts expect the number of shares outstanding to decline by 1.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.4%, as per the Simply Wall St company report.

NOTE Future Earnings Per Share Growth

Risks

• NOTE's recent period of flat or declining sales, combined with guidance for only marginal growth and reliance on customer restocking in the future, suggests vulnerability to ongoing reduced consumer demand and macroeconomic slowdowns, which could negatively affect revenues and growth rates.
  
• Persistent price pressure in the electronics manufacturing sector, from both customers and increased global competition, especially from lower-cost Asian EMS providers, threatens to erode NOTE's gross margins and compress net earnings over time.
  
• Heavy dependence on a few large customers-as highlighted by the very significant decline in UK sales due to a single customer pausing orders-creates risk of sharp, sudden drops in revenue if any major customer departs or reduces business.
  
• Intensifying geopolitical tensions and risks of new trade barriers or tariffs could further disrupt NOTE's international supply chains, increase input costs, and make manufacturing operations more volatile, potentially lowering profit margins and raising working capital demands.
  
• Accelerating ESG and regulatory requirements may force NOTE to make substantial compliance and investment outlays, particularly in lower-cost regions with less automation, which would pressure profitability and potentially diminish available cash for innovation or dividends.

Valuation

• The assumed bullish price target for NOTE is SEK210.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of NOTE'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 SEK210.0, and the most bearish reporting a price target of just SEK127.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SEK5.1 billion, earnings will come to SEK404.4 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 6.4%.
• Given the current share price of SEK195.4, the bullish analyst price target of SEK210.0 is 7.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.