Translation: Original published in Finnish on 06/26/2025 at 08:30 am EEST

Nexstim is a medical technology company whose transcranial magnetic stimulation systems are used in pre-operative brain mapping and to treat neurological diseases and disorders. Following successful growth in recent years, the company is on track to generate a profit this year. With the earnings turnaround, the investment profile has evolved to a slightly more mature stage, even though Nexstim is still positioned as an early-stage profitable growth company. We expect strong growth from the company in the coming years, supported by new partnership agreements, the realization of which also involves uncertainties. We raise the target price to EUR 10.0 (was EUR 9.0) on the back of our forecast revisions and lower our recommendation to Reduce (was Buy) as the strong share price rally has lowered the risk/reward ratio.

Value creation with systems, licensing income and clinic network model

Nexstim develops and sells systems for therapy applications for the treatment of major depressive disorder and pain, and diagnostics applications for pre-operative brain mapping. System sales have returned to growth after a weaker year in 2023, and the launch of the new NBS6 system with diagnostics capabilities is expected at the end of 2025. Over the past year, the company has signed cooperation agreements that open new growth opportunities. The Brainlab collaboration brings distribution power to diagnostics products, and the collaboration with SinapticaTherapeutics opens opportunities in the treatment of Alzheimer's disease. Nexstim has also licensed its technology for the treatment of depression, but the agreement has run into a dispute. Nexstim has built a network of partner clinics and thereby seeks a share of the value creation of the clinics. The company’s business model has scalable features and potential for high profitability. At the moment, the company is still clearly profiled as a growth company, whose profile is becoming somewhat more mature as it achieves an earnings turnaround.

Profitability expected from 2025 onwards

Nexstim has successfully grown in recent years and reduced its losses. We expect a more permanent earnings turnaround from 2025 onwards, supported by the Brainlab collaboration and the associated 4 MEUR guarantee margin. We deem the formalization of the letter of intent signed with Sinaptica likely, which would also lead to significant growth for Nexstim in the coming years and contribute to strengthening the earnings turnaround. We expect strong growth in the coming years, the achievement of which requires success in the Brainlab collaboration, realization of the Sinaptica agreement in line with preliminary data, realization of licensing income, and success in organic growth. The forecast risk is quite high, as growth relies heavily on the realization of contracts and new business initiatives with limited visibility. In the long term, we see potential for an EBIT of up to 20% driven by a high gross margin and licensing income if the company succeeds in its growth strategy in the long term. Nexstim's financial position has improved significantly over the past year due to debt instruments, Brainlab's capital investment, and the prospect of an earnings turnaround.

The price tag is highish considering future uncertainties

We base our valuation on EV/S multiples and the DCF model, as the earnings level for the coming years is still on a rather uncertain footing. Nexstim's 2025e EV/S is 6.1x and decreases to 4.7x in 2026e, with our estimates that expect strong growth. The share is priced neutrally relative to its history and at a high multiple compared to listed peers. Our DCF model values the share at EUR 10.4. We find the share slightly overvalued, and a positive recommendation would require lower valuation multiples to offset uncertain growth.