Goldman Sachs Maintains Buy Rating on Ottobock with Target Price of €93

Overview

This report addresses market concerns raised by third-party reports and provides clarification and valuation reassessment for Ottobock. Goldman Sachs believes the company has solid fundamentals, clear growth drivers, and its current valuation does not fully reflect financial strengths, maintaining Buy rating and €93 target price.

Core views

Revenue growth: The report forecasts 9% CAGR for FY25-28, driven by broad-based growth, long-term patient relationships, innovative products, and reimbursement policy optimization. Margin expansion: Positive product mix, operating leverage, and productivity improvements will drive 12% EBITDA CAGR. Cash flow: Free cash flow growth under disciplined management is expected to outpace EBITDA. Valuation: Current 9.0x EV/EBITDA and 16.8x forward P/E do not fully reflect attractiveness; stock may re-rate as management delivers guidance. Addressing market concerns: 1) Russia and Ukraine account for high single-digit FY24 revenue, with medical products exempt from EU sanctions; 2) R&D capitalization is common in medical device industry, with average annual difference between capitalized and amortized amounts at ~€16mn, impacting EBIT margin by <100bps; 3) Historical IFRS adjustments are genuine one-time items (e.g., restructuring, M&A, impairments) expected to decline significantly; 4) Post-IPO governance framework supports long-term family business orientation, with operations and financing independent from shareholders' personal financial situations.

Analysis framework

Goldman Sachs uses hybrid valuation (50% DCF, 50% multiples). DCF model (6.6% WACC, 2.5% terminal growth) yields intrinsic value of €96.3/share; multiples approach applies 11.5x target EV/EBITDA to Q5-Q8 annualized forecasts, yielding €90.4/share. Analysis focuses on growth drivers (revenue CAGR), earnings quality (margin expansion and cash flow), and valuation discount (current multiples below target), incorporating industry characteristics (R&D capitalization norms) and governance structure (post-IPO independence).

Methodology notes

• Valuation methodsDCF

  Calculates intrinsic value by discounting projected future free cash flows at weighted average cost of capital

  Report uses DCF model with 6.6% WACC and 2.5% terminal growth rate, deriving €96.3/share as one valuation benchmark.

• Valuation methodsEV/EBITDA valuation

  Assesses company value based on enterprise value to EBITDA multiple

  Report applies 11.5x target EV/EBITDA multiple to future quarterly projections, deriving €90.4/share, which is weighted with DCF result to arrive at target price.

• Company Fundamentals & Financial FrameworkEarnings Quality Analysis

  Distinguishes recurring earnings from one-time adjustments to assess core profitability

  Report details FY25 adjustments (restructuring, M&A, impairments), emphasizing their non-cash/one-time nature and expected future reduction to improve earnings predictability.

Key data

• Target Price€9312-month target price, implying 73.8% upside
• Current Price€53.50Closing price as of May 19, 2026
• Revenue CAGR (FY25-28E)9%Goldman Sachs forecast, broad-based growth
• EBITDA CAGR (FY25-28E)12%Benefiting from product mix optimization and operating leverage
• R&D Capitalization Impact~€16mn/year3-year average, EBIT margin impact <100bps
• Net Debt/EBITDA (FY26E)2.0xManagement guidance below 2x, Q1 26 at 2.2x

Impact & implications

The report believes Ottobock's current valuation does not fully reflect growth and earnings improvement potential. Stock may re-rate as management delivers guidance and new products launch (e.g., OTWorld Conference and C-Brace technology). Independent operational structure and disciplined capital allocation framework (prioritizing growth investments and shareholder returns) support long-term value.

Risks

• Reimbursement policy changes (e.g., Section 232 investigation)
• Intensified competition or new entrants
• R&D pipeline and product execution risks
• Supply chain/manufacturing risks and raw material cost inflation

What to watch

• Impact of new product launches at OTWorld Conference on organic growth
• Incremental contribution from C-Brace technology post-FY26
• Whether one-time adjustments decline significantly as expected
• Whether net debt/EBITDA falls below 2.0x as planned