Growing Safety Concerns And XR Adoption Will Boost Immersive Training

Key Takeaways

• Enhanced recurring revenue through contract commitments and high renewal rates could sharply boost earnings visibility and reduce customer churn.
  
• Category leadership in immersive, AI-driven training and expansion into new sectors and international markets positions the company for rapid growth and revenue diversification.
  
• Heavy dependence on government contracts and specialized funding, combined with fast-evolving technology and competitive threats, exposes VirTra to unpredictable revenues and heightened margin pressure.

Catalysts

Provides use of force training and firearms training simulators for the law enforcement, military, and commercial markets worldwide.

• Analyst consensus views VirTra's STEP subscription and recurring revenue model as supportive for growth, but this may understate benefits-recently enforced 3-year contract commitments and a 95% renewal rate could drive more rapid compounding of high-confidence recurring revenue and sharply lift earnings visibility, with average customer value expanding significantly as sales cycles accelerate and churn plummets.
  
• While analyst consensus highlights backlog momentum and expedited procurement via GSA and government modernization, it likely underappreciates VirTra's direct alignment with DoD and allied modernization mandates-these shifts towards modular, rapid-acquisition training solutions could unlock contract wins far bigger and more frequent than previously modeled, dramatically accelerating top-line revenue and multi-year backlog growth.
  
• VirTra's accelerated development in AI-driven scenario creation and rapid expansion of its immersive training content positions it for long-term category leadership, enabling continuous delivery of differentiated, high-margin software and content upgrades-this will further boost net margins, recurring software revenue, and raise customer switching costs as agencies are compelled to stay current with evolving standards.
  
• Early traction of VirTra's V-XR extended reality platform-designed for multi-sector applications from law enforcement to healthcare, fire, and private security-signals imminent broadening of its addressable market beyond government customers, potentially unlocking entirely new commercial revenue streams and smoothing earnings volatility through cyclical downturns.
  
• Sustained international expansion, supported by strengthened sales infrastructure and adaptive regional engagement, could drive a step-change in overseas growth, as surging global defense budgets and rising regulatory requirements for certification training make VirTra's platform the preferred solution for a growing pool of military and civil agencies-with upside to revenue diversification and long-term operating leverage.

VirTra Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on VirTra compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming VirTra's revenue will grow by 18.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.3% today to 15.8% in 3 years time.
• The bullish analysts expect earnings to reach $6.8 million (and earnings per share of $0.58) by about August 2028, up from $2.2 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 19.3x on those 2028 earnings, down from 36.3x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 36.3x.
• Analysts expect the number of shares outstanding to grow by 0.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.82%, as per the Simply Wall St company report.

VirTra Future Earnings Per Share Growth

Risks

• Persistent delays in government budget approvals, grant allocations and shifting agency priorities point to an operating environment where government spending on defense and law enforcement can be deferred or cut, reducing VirTra's revenue stability and creating near
• and long-term pressure on revenue growth.
  
• VirTra's ongoing heavy exposure to U.S. law enforcement and military agencies, coupled with ongoing contract and budget volatility, increases risks that concentrated customer dependency could result in lumpy revenues and unpredictable earnings, especially if agencies are forced to pause contracts.
  
• The company's attempt to drive customers to shorter-term, three-year sales cycles to accelerate bookings signals concern about rapid technology turnover and could result in increased customer churn, higher sales costs, and downward pressure on net margins if customers resist these changes.
  
• While the company highlights innovation with XR and AI tools, the rapid pace of technological advancement by much larger tech and defense competitors in the immersive training space threatens VirTra with potential product obsolescence, increasing competition and possible margin compression if pricing power erodes.
  
• The text repeatedly notes reliance on specialized grant funding, procurement cycles, and government program alignment-all of which are susceptible to long-term secular shifts toward police reform, reallocation of public funds, or changes in industry regulation, raising significant risks to sustained revenue growth and pipeline momentum.

Valuation

• The assumed bullish price target for VirTra is $9.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of VirTra'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 $9.5, and the most bearish reporting a price target of just $7.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $43.0 million, earnings will come to $6.8 million, and it would be trading on a PE ratio of 19.3x, assuming you use a discount rate of 7.8%.
• Given the current share price of $6.97, the bullish analyst price target of $9.5 is 26.6% 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.