Last Update 05 Apr 26

Fair value Decreased 0.23%

SAAB B: Higher P/E And Mixed Ratings Will Frame Fairly Valued Outlook

Saab's analyst price targets have moved higher, with recent updates pointing toward SEK 516 to SEK 540 as analysts factor in revised fair value assumptions and updated expectations for growth, margins and future P/E levels.

Analyst Commentary

Recent price target updates for Saab cluster in the SEK 516 to SEK 540 range, with analysts adjusting their fair value views while still expressing caution through Underweight and Sell ratings.

Bullish Takeaways

Bullish analysts are assigning higher fair value estimates, which signals increased confidence in Saab's ability to support a higher share price over time if execution aligns with their models.
The move toward price targets in the SEK 516 to SEK 540 band suggests analysts see room for Saab's valuation to reflect revised assumptions on growth, margins and P/E levels.
Higher targets from multiple firms indicate that Saab's fundamentals and project pipeline are under closer consideration, which can help support a more robust investment case for long term holders.
By revisiting their fair value work, bullish analysts are effectively acknowledging that previous assumptions may have been conservative relative to their updated expectations.

Bearish Takeaways

Despite higher targets, bearish analysts remain cautious, maintaining Underweight and Sell ratings, which flags concerns around risk reward at current prices.
Some analysts appear wary that Saab's execution on growth and margin expectations may not fully match the higher valuation implied by the new targets.
The combination of raised targets with still bearish ratings suggests that, in their view, the current market price already reflects much of the anticipated improvement in fundamentals.
Bearish analysts may also be highlighting sensitivity to P/E assumptions, indicating that if earnings or margins fall short of their updated expectations, the share price could face pressure relative to these new targets.

What’s in the News

Order of approximately SEK 2.6b from the Swedish Defence Materiel Administration for a mobile, modular counter unmanned aerial system designed to protect both military and civil infrastructure, with deliveries planned in 2027 to 2028 (Client Announcements).
Annual General Meeting on 1 April 2026 approved a dividend of SEK 2.40 per share, to be paid in two instalments of SEK 1.20 per share with record dates on 7 April 2026 and 6 October 2026 (Dividend Increases).
Memorandum of Understanding signed with Canadian AI company Cohere to collaborate on AI technologies supporting GlobalEye, with potential applications for current and future international operators (Strategic Alliances).
Naval operations to be consolidated into a single business area called Naval from 1 April 2026, merging business area Kockums with most of the Naval Combat Systems unit to create one organisation under Mats Wicksell (Business Reorganizations).
Further collaboration agreements signed with Poland’s defence industry partners Polska Grupa Zbrojeniowa and WB Group, covering submarine maintenance, repair and overhaul, as well as autonomous naval and unmanned aerial systems (Strategic Alliances).

Valuation Changes

Fair Value: SEK 604.45 in the earlier narrative compared with SEK 603.09 in the updated work, representing a very small downward adjustment in the modelled fair value per share.
Discount Rate: 5.87% previously compared with 5.74% now, a slight reduction that increases the present value assigned to future cash flows.
Revenue Growth: 19.39% in the earlier assumptions compared with 19.37% in the update, a marginally lower implied growth rate.
Profit Margin: 8.59% before compared with 8.56% in the latest model, reflecting a very small trim to projected profitability.
Future P/E: 33.59x in the prior framework compared with 33.55x now, indicating a minimal change in the valuation multiple applied to future earnings.

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Key Takeaways

Saab is set to benefit from increasing global defense spending and prioritization of European self-reliance, supporting sustained demand and reduced revenue volatility.
Focus on advanced technologies, sustainability, and expanding service offerings should drive high-margin growth, recurring revenues, and contract differentiation.
Saab faces revenue and margin risks from reliance on government contracts, heavy upfront investments, tightening export controls, rising competition, and escalating digitalization costs.

Catalysts

About Saab

Provides products, services, and solutions for military defense, aviation, and civil security markets Internationally.What are the underlying business or industry changes driving this perspective?

The significant ramp-up in global defense spending, especially following the recent NATO commitment for member states to target 5% of GDP by 2030-2035, directly supports sustained demand for Saab's advanced defense solutions. Saab's strong backlog (~SEK 200 billion) and rising book-to-bill ratio position it to benefit from this long-duration trend, likely driving outsized topline growth over the next several years.
Heightened adoption of AI, autonomous platforms, and digital warfare technologies is accelerating investment requirements from governments globally. Saab's committed R&D in emerging technologies (e.g., AI-enabled Gripen fighters, collaboration with General Atomics on drones, automated manufacturing) should increase its share in high-margin, next-generation contracts, boosting future earnings and improving net margins.
Increasing need for European defense sovereignty and industrial self-reliance positions Saab as a preferred supplier, potentially capturing incremental share of refocused European defense budgets and benefiting from multi-year mega contracts-this geographical diversification and preference for local vendors may reduce revenue cyclicality and mitigate single-country political risks.
Saab's investments in sustainable technologies (e.g., Net Zero targets, capability to operate aircraft on sustainable fuels) cater to intensifying regulatory and governmental procurement trends toward green defense solutions. This could enable Saab to win orders over less-adapted peers, supporting both revenue expansion and margin resilience as sustainability becomes a contract differentiator.
Ongoing expansion in lifecycle services, support and digital contracts (e.g., maintenance, cybersecurity, training via Combitech) is increasing recurring/annuity revenue-a trend that enhances earnings predictability, reduces volatility tied to large equipment sales, and contributes to stable, higher net margins over time.

Saab Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Saab's revenue will grow by 19.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.0% today to 8.6% in 3 years time.
Analysts expect earnings to reach SEK 11.5 billion (and earnings per share of SEK 21.32) by about April 2029, up from SEK 6.3 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 33.6x on those 2029 earnings, down from 54.7x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 49.2x.
Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 5.74%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Saab's heavy dependence on government contracts-particularly from Sweden and a small number of key export markets-exposes it to political decision-making, budget cycles, and potential shifts in defense spending priorities, which could introduce volatility or sudden declines in future revenues.
Requirement for sustained, front-loaded investments in capacity expansion (factories in India, U.S., and Sweden) and advanced R&D (especially for AI, autonomous systems, and digitalization) heightens the risk of margin pressure and negative free cash flow if order intake does not keep pace with cost escalations, potentially impacting net earnings and financial flexibility.
Rising global scrutiny on arms exports and potential tightening of export controls from entities like the EU or UN could restrict Saab's access to critical international markets, particularly as more than half of recent order intake is domestic, which may ultimately limit revenue growth and diversification over the long term.
Intensifying competition from both established global defense firms and new entrants leveraging digital and AI-based defense solutions could erode Saab's market share, compress margins, and force higher ongoing R&D expenditure to remain competitive, with the risk that customers may not pay sufficiently higher prices to cover these investments, impacting long-term profitability.
Ongoing and increasing investment in digitalization, IT security, and automation-while necessary-may lead to higher corporate costs and lower gross margins in the near future, and exposes Saab to the risk of execution delays or cost overruns (noted in sectors like underwater/autonomous vehicles and Aeronautics), potentially resulting in impaired earnings and delayed profitability realization.

Valuation

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

The analysts have a consensus price target of SEK603.09 for Saab 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 SEK760.0, and the most bearish reporting a price target of just SEK490.0.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK134.6 billion, earnings will come to SEK11.5 billion, and it would be trading on a PE ratio of 33.6x, assuming you use a discount rate of 5.7%.
Given the current share price of SEK642.0, the analyst price target of SEK603.09 is 6.5% lower. 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

SAAB B: Defense Demand And AI Investments Will Shape Future Opportunities And Risks