Personalized Healthcare And Automation Will Unlock Future Markets

Key Takeaways

• Expansion into personalized healthcare and new verticals like defense is driving higher-margin growth and improving revenue resilience across regulated, mission-critical markets.
  
• Investments in cloud-based software, automation, and AI are boosting operational efficiency, increasing recurring revenue, and supporting long-term margin expansion.
  
• Ongoing demand softness, macro risks, delayed new verticals, and margin pressures threaten growth and stability, while unutilized debt heightens balance sheet vulnerability.

Catalysts

Provides additive manufacturing and medical software tools, and 3D printing services in the Americas, Europe, Africa, and the Asia-Pacific.

• The company's expansion into personalized healthcare-demonstrated by ongoing double-digit growth in its Medical segment and initiatives like the U.S. market clearance of the personalized knee alignment feature and the pilot with Johnson & Johnson for respiratory 3D surgical planning-positions Materialise to benefit from the growing demand for patient-specific medical solutions. This should support above-average long-term revenue growth and higher margins due to higher-value medical applications.
  
• Materialise's investments and progress in automation and AI-driven additive manufacturing workflows, evidenced by its recent partnership with Synera and the launch of the Magics SDK with agentic AI integration, enable more efficient and scalable operations for customers. This is expected to enhance recurring software revenue and support margin expansion over time as clients transition to higher-value, cloud-based platforms.
  
• The company's strategic move to serve the defense and aerospace sectors-driven by geopolitical shifts emphasizing localized and resilient supply chains-should unlock new, higher-margin revenue streams in regulated, mission-critical markets. This exposure to sectors emphasizing lightweighting and sustainability is expected to provide resilience and long-term revenue visibility.
  
• Disciplined cost control, portfolio streamlining (such as ceasing non-core manufacturing activities and optimizing the Manufacturing segment), and sustained R&D investments-particularly in the Medical segment-have improved EBIT and EBITDA despite top-line headwinds, indicating a structural shift toward stronger operational profitability and better long-term earnings potential.
  
• The ongoing transition in the Software segment to a cloud subscription model is increasing the proportion of recurring revenue, providing more predictable future cash flow and enabling upward margin potential as the customer base shifts from one-off to annuity-style contracts.

Materialise Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Materialise's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.1% today to 6.7% in 3 years time.
• Analysts expect earnings to reach €21.0 million (and earnings per share of €0.36) by about July 2028, up from €5.6 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 28.6x on those 2028 earnings, down from 48.3x today. This future PE is lower than the current PE for the US Software industry at 46.9x.
• 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 9.41%, as per the Simply Wall St company report.

Materialise Future Earnings Per Share Growth

Risks

• Materialise's Software and Manufacturing segments are experiencing significant revenue declines (Software down 12%, Manufacturing down 25% YOY in Q2 2025), suggesting ongoing exposure to cyclical industrial demand and a risk of continued revenue pressure if secular industrial adoption of 3D printing remains limited, which may negatively impact consolidated revenue growth.
  
• Management repeatedly cited intensified geopolitical volatility, macroeconomic uncertainty, and unfavorable foreign exchange as challenges, implying that persistent global instability and supply chain disruptions could hamper contract visibility and lead to increased operational inefficiencies, posing a long-term risk to revenue and earnings stability.
  
• The pilot collaboration with Johnson & Johnson in the respiratory market is for a very new, unproven market; management warns that revenue impact is years away and not expected this year, highlighting the risk that the anticipated growth from new healthcare verticals may be delayed or smaller than assumed, potentially affecting long-term revenue growth and market diversification.
  
• Materialise had to implement structural cost reductions and reclassify/managing certain assets in its Manufacturing division due to lower volumes and a need for greater cost flexibility; the difficulty in making costs variable and reliance on margin discipline in face of declining volumes signals risk of persistent margin pressure if top-line growth does not recover.
  
• While the company maintains a strong cash position and plans for possible acquisitions or CapEx, its growing debt (through multi-tranche bank facility) without immediate deployment for revenue-generating assets could amplify balance sheet risks if anticipated growth opportunities or M&A integrations fail to materialize, with negative implications for net margins and earnings.

Valuation

• The analysts have a consensus price target of $8.992 for Materialise 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 $9.98, and the most bearish reporting a price target of just $8.01.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €314.5 million, earnings will come to €21.0 million, and it would be trading on a PE ratio of 28.6x, assuming you use a discount rate of 9.4%.
  
• Given the current share price of $5.31, the analyst price target of $8.99 is 40.9% 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.