Hexagon (OM:HEXA B) Margin Expansion Reinforces Bullish Narratives Despite Premium Valuation

Hexagon (OM:HEXA B) reported earnings growth of 10% over the past year, with a five-year average growth rate of 7.5% per year. Looking ahead, forecasts call for annual earnings growth of 14.5% and revenue growth of 6.2%, both outpacing the broader Swedish market. Margin expansion and consistent performance may attract growth-focused investors. Some investors, however, may hesitate due to Hexagon’s premium price-to-earnings ratio of 31.5x and share price trading above estimated fair value.

See our full analysis for Hexagon.

The next section puts these results head-to-head with the prevailing narratives about Hexagon, highlighting where the data confirms or contradicts what the market has been saying.

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Margins Widen to 17.3%, Above Industry Average

• Hexagon’s net profit margin rose to 17.3% from last year’s 15.8%, reinforcing the analysts' consensus view that ongoing cost improvements and scaling of higher-margin technologies are delivering results.
  • Consensus narrative notes expanding recurring software revenues and operational initiatives are contributing to this margin growth, supporting claims that Hexagon is building a more predictable earnings base and improving profitability across its major segments.
  • What stands out is that, despite broader industry margin pressure and cost realignment, Hexagon’s ability to lift its net margin in this environment substantiates the case for margin resilience and operational discipline. These are core planks of the consensus view.
• Analysts also highlight that management’s focus on automation and innovation, with high-profile launches such as MAESTRO and AEON robotics, is set to further drive margin expansion from the current level as these technologies scale in late 2026.
  • By boosting high-margin software and asset intelligence segments, Hexagon is positioned to benefit from ongoing digitalization and sector demand for robotics and automation.
  • While competitors grapple with end-market volatility, Hexagon’s steady margin improvement delivers on the consensus argument that it can outperform cyclic peers in capital-intensive industries.

Curious how Hexagon's margin expansion stacks up to market expectations? See the full consensus case for the company's future growth potential. 📊 Read the full Hexagon Consensus Narrative.

DCF Fair Value Below Market Price

• With a current share price of SEK120.85 and a DCF fair value estimation of SEK115.48, Hexagon is trading at roughly 5% above its modeled intrinsic value based on projected cash flows.
  • Analysts' consensus view suggests that for the current market price to be justified, investors must believe in continued earnings growth, margin scaling to 20.7% by 2026, and robust uptake of new automation products.
  • This valuation gap creates tension with the consensus narrative’s positive outlook, as it requires ongoing outperformance and successful innovation delivery to close the premium over DCF fair value and maintain upward price pressure.
• Compared to peer and industry averages, Hexagon’s price-to-earnings multiple stands at 31.5x versus 27.8x and 26x respectively, making it one of the pricier options in its group.
  • The analysts note that, although Hexagon’s above-market growth profile partly explains its premium valuation, the current price requires faith that strategic launches and cost execution will consistently outrun sector headwinds.
  • Investors attuned to valuation may see this as a signal to monitor for future catch-up in profits relative to its ambitious pricing compared to peers.

Recurring Software Revenues Improve Predictability

• Hexagon is increasing its base of recurring software and SaaS revenues, particularly in Asset Lifecycle Intelligence and SIG, which is cited in the consensus narrative as a key factor in driving more stable and predictable cash flows.
  • The consensus narrative emphasizes these are helping to offset volatility in legacy segments like Geosystems, supporting a gradual transition toward a steadier, higher-quality revenue model.
  • This shift is credited with stabilizing gross margins and insulating performance from end-market swings, which is especially important in light of cyclical downturns experienced by traditional manufacturing and construction end markets.
• Analysts’ consensus view further notes that the upcoming spin-off of the Octave software business will sharpen management focus on core high-margin verticals such as robotics, aerospace, and public safety. This builds on the trend of revenue quality improvement.
  • This move is expected to unlock improved capital allocation and drive returns on equity, echoing the consensus claim that Hexagon’s tech leadership can translate into superior long-term profitability.
  • The emphasis on automation, recurring revenues, and vertical integration aligns closely with the consensus view that Hexagon can grow earnings even in uneven industry environments by leaning into stable, tech-driven business lines.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Hexagon on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Hexagon.

See What Else Is Out There

Hexagon’s premium valuation and share price above intrinsic value mean investors are paying now for growth that still must be delivered.

If you’d prefer to target opportunities trading at more attractive prices, use our these 878 undervalued stocks based on cash flows to surface companies with stronger value signals and upside potential right now.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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