The Burn The Index portfolio launched in May 2026 and exists out of five positions. So far, we have generated a return of 10.1%.

If you would have invested the same amount of money on the same days in the S&P500, your return would have been 1.1%.

Although the market may look like it’s booming, the S&P 500 has in fact been moving sideways for months.

Our goal is clear: outperform the S&P500 by owning undervalued quality businesses with an attractive growth outlook.

The month of October was very busy. I’ll walk you through the transactions, the performance, company-specific updates and next steps.

This is where the free subscriber section starts. Consider subscribing for free to read this article and to receive access to the portfolio and watchlist.

Read more

I am starting to look into the broader AI play.

Why only now? The tech has established itself in our daily lives, as well as business processes. Overall, the industry seems to be maturing, which also provides clarity on which businesses to consider.

I was involved in a few semiconductor industry deals during my Private Equity days, so this is familiar territory.

The company that caught my eye a few months ago was a well known local, but globally less familiar tech business called BE Semiconductor Industries (BESI).

I’ll walk you through the business, where it stands today, and whether this is a company worth adding to your portfolio.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

BESI Puts Chips Together

BESI is a Dutch company that makes machines used to assemble and package chips. If this sounds like gibberish, let me explain.

Assembly means positioning chips and making the electrical connections needed to work within a device. Chips can sit side by side or be stacked together.

Packaging turns those components into a protected unit. The package supports the chips, protects their circuits and provides connections to a circuit board.

In short: BESI’s equipment helps turn tiny electronic components into packages that can be used in computers, smartphones, cars and other devices.

Let us look at the company’s three product groups:

1. Die-attach machines place and bond chips to a supporting base or another chip, using conventional bonding (using adhesives, solder or direct bonding) to advanced hybrid bonding (copper contacts).

2. Packaging equipment covers assembled chips with protective material and cuts or shapes packages into finished units.

3. Plating equipment applies thin metal coatings to components to improve electrical contact and protect surfaces.

As mentioned earlier, hybrid bonding is part of the Die attach product group. And this technology is at the core of the investment thesis, as well as the wobbly sentiment.

Hybrid Bonding As The Next Big Thing

Hybrid bonding allows chip designers and manufacturers to join chips directly through copper contacts, while also bonding the insulation surface around them,

Why is this important? It enables more data exchange, less energy usage and it takes up less space. This has been the eternal race in the semiconductor industry.

Although there is a hype around hybrid bonding technology, it is not new. Sony already used it in their camera sensor stack, and even AMD applied it to add an extra layer of faster memory. I’ll spare you the technical details.

Hybrid bonding recently became a hype during the Nvidia AI-fever in 2023. Sales went through the roof and the guidance dropped every analyst’s jaw on the floor. That in turn led to a collective search for bottlenecks. And then BESI’s name surfaced.

More recently, the hybrid bonding application has become the centre of attention in another AI corner: high-bandwidth memory (HBM), made by companies like Micron and SK Hynix.

But stacking many memory chips reliably is complicated process. Manufacturers are therefore balancing between utilising proven and installed bonding machines, whilst implementing hybrid bonding solutions.

The key question is how fast hybrid bonding will be adopted.

Q3 Results Look Promising

BESI’s Q3 results gave a glimpse of how AI is impacting (and boosting) their results. Revenue reached €283.4 million, up 113.6% YoY with net profit going 4x to reach €107.2 million.

Hybrid bonding orders in the first 9 months exceeded 2x the 2025 total. The customer base expanded to 23 companies. It seems that adoption is moving along.

Its cooperation with Applied Materials also expanded. Earlier this month, BESI joined Applied’s EPIC innovation centre. Just this week, Applied Materials announced to raise its stake in BESI to 20%.

Yet the strong results arrived alongside a competitive scare. Rumours suggested that ASML appeared to be developing a competing tool, raising concerns about BESI facing a much larger equipment supplier.

So far, there is no concrete evidence that ASML is moving into this area, but as an investor this is worth monitoring. BESI’s CEO also pointed out that BESI and ASML were cooperating to improve placement accuracy.

There was one wrinkle though. During the Q3 earnings call, analysts asked when hybrid bonding in HBM would move into substantial production volumes. The CEO pointed to continued development and new orders, but acknowledged lack of visibility.

He also pushed back against suggestions of customer delays. Q4 revenues will be more or less flat because deliveries are scheduled to align with production readiness on the client side. Most of which will be in early 2027.

BESI Is An Industry Leader

BESI enters the hybrid bonding opportunity from an established position. In October 2025, management estimated its market share well above 60%.

That means the industry is familiar with BESI’s products, they are embedded in the supply chain and manufacturing process, and the company has built up strong relationships in every corner of the semiconductor industry.

On top of that, they are considered a leading developer in hybrid bonding, the technology that holds so much promise, but adoption on a wider scale (especially in memory) is slower than expected.

Great to see is also the ever expanding collaboration with Applied Materials, who will raise its stake from 9% to approx. 20% in BESI. Applied Materials would not be highlighting the promise of hybrid bonding if it were not looking to scale this technology.

I think it is fair to say that also the memory players are considering hybrid bonding as a potential game-changer, but they remain cautious about how to scale up production.

Of course, BESI is not alone. They face competition from ASMPT, which offers both conventional assembly equipment and hybrid bonding systems, while Hanmi Semiconductor and Kulicke & Soffa compete through thermocompression bonding (advanced logic and HBM).

The obvious risk is either a competitor improving its hybrid bonding solution, or a competitor making big advancements with existing technology, thereby postponing the wider adoption of hybrid bonding. It’s very difficult to assess this situation as an outsider.

Valuation and My Next Steps

Read more

Sometimes it is enough to let your investments do their thing. And so far we cannot complain, with the portfolio up 16.4% since inception (May 2026).

I’ve been passive in September simply because I did not see anything compelling. Over the weekend the market provided us with an opportunity which I’l happily take with both hands.

Here are the details on my latest purchase.

This section is for free subscribers. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.

TransMedics shareholders are likely not amused, with the share price down 42% YTD.

Management surprised the market in Q1 when announcing 2026 would be an investment year for the company to lay the foundation for further growth.

In the short term that means expenses go up, with net profit and cash flow going the opposite direction. The market said “no thanks”.

TransMedics has always been on my watchlist (valuation as the main hurdle). The business model and problem it tries to solve make it a compelling case.

I’ve written puts on TransMedics earlier this year, but haven’t outright owned the business. With the stock on a downward trajectory once more this year, it’s time to revisit the investment thesis, ahead of the Q3 print on November 4th.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

The H1 Results That Scared Investors

The first half of 2026 tells an interesting story. Revenues grew 21% YoY in both quarters, reaching $173.9 million and $189.9 million respectively.

It’s fair to say that demand for Transmedics’ organ transplantation platform remained strong, with Q2 benefiting from growth in liver transplantation and logistics services.

Management even raised the lower end of its FY revenue guidance, with $737 to $757 representing the new range.

That’s one part of the story. The profitability picture didn’t look so pretty. Operating income declined from $64 million in H1 2025 to just $37 million in H1 2026.

As a result, operating margins compressed as spending increased to drive the next growth phase.

This included R&D expenses driven by investments in OCS Kidney, Gen 3.0 and ongoing clinical programs. Meanwhile, the growing contribution from services also weighed on gross margins.

Prioritising Growth Over Profitability

It is an unpleasant experience for any investor to see operating margins deteriorate from 22.1% to 12.1% YoY. This is where management’s longer-term strategy becomes important to understand.

Rather than just maximising near-term profitability, TransMedics is deploying cash to fund new products, clinical trials and international expansion to ensure the growth cadence can continue.

Let’s briefly unwrap these initiatives:

• New Products: Two things here. TransMedics is developing its next-generation OCS (Gen 3.0) to improve the existing technology. Besides, they are expanding into the kidney segment, allowing the company to enter an entirely new market. Both are in development, with the first U.S. kidney clinical trial planned for 2027.

• Clinical trials: TransMedics is running the ENHANCE Heart and DENOVO Lung programs to expand the types of donor organs that can be used with its existing technology. These studies are ongoing. If more donor hearts and lungs become eligible for use, TransMedics can grow its existing business without needing to develop an entirely new product.

• International expansion: Focus until now was primarily on the US. The company is now looking to bring this model abroad, starting with Europe. In July 2026, it completed an investment in German aviation operator PAD Aviation to help establish a European organ transportation network. This is still an early-stage initiative, but it might be the first step into replicating a successful model.

TransMedics is not sitting still. They are looking into expanding internationally, improving existing products and entering new segments. At this point I am surprised the market is worried about lower margins, and not about operational execution.

Management Is Not Helping Themselves

First things first: Waleed Hassanein, the founder and CEO, deserves a lot of credit. He’s been an essential part of the TransMedics story.

So let’s keep the operational performance separate from what I do want to address: communication.

Management, including the CEO, speaks with high conviction about the business, the growth initiatives and the overall vision for TransMedics.

At the same time, they seem less forthcoming when investors ask for detailed financial forecasts or challenge strategic assumptions.

That creates a communication problem. That in turn tends to evolve into trust issues if you don’t contain them in a timely matter.

When a company is investing, and profitability is deteriorating, investors need more transparency. Don’t take my word for it. The market sold off the stock days after.

Hassanein's confidence may be an asset in building TransMedics, but stronger communication around investment spending and expected returns would make the investment case easier to assess.

TransMedics Leans on a Narrow Moat

TransMedics built a strong position in organ transplantation, but there’s competition.

Companies like OrganOx, XVIVO and Paragonix offer alternative organ preservation technologies. Let’s do a quick tour.

OrganOx is the most important competitor, as its technology also keeps donor livers functioning outside the body. They received FDA authorisation to operate its system during air transport. It was later acquired by Terumo (deep pockets).

Meanwhile, XVIVO and Paragonix are developing and commercialising alternatives for heart and lung preservation.

As you can see, TransMedics isn’t the only one able to come up with innovative solutions.

But technology alone only gets you that far. I think that TransMedics’ competitive advantage is the combination of its National OCS Program, the devices, the organ retrieval service and own fleet.

This integrated approach makes life easier for transplant centers and creates a much higher barrier for competitors. And, I think that developing a national network of medical professionals, logistics operations and hospital relationships is hard.

Wrapping things up: the moat is robust, but increased competition is inevetable. The company has a head start and is investing to maintain that advantage.

Valuation and My Next Steps

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

That helps explain the sell-off we’ve witnessed over the past few quarters. The stock has now plunged 75% from its all-time highs, with no signs of a bottom in sight. At least for now.

In a way, it is counterintuitive, because Novo is still a best-in-class business, with a rich pipeline and a major position in the fast-growing obesity care market. Tailwinds exist, but Novo just isn’t capturing them as well as Eli Lilly right now.​

This article was written in collaboration with TacticzHazel. TacticzHazel’s newsletter is focused on quality fundamental analyses and deep research in every corner of the market.

I really like his content and investing approach, and I’d highly recommend subscribing to his newsletter via the link below.​

Subscribe to TacticzHazel

In this article, we will cover where Novo stands today, highlight the major updates from the CMD, and assess whether Novo is a buy today. We will focus on the business side of the company, not the trial/medical side. That is for another time.

Where does Novo stand right now

As we mentioned before, Novo is going through a very rough period. The stock price is in freefall and it’s hard to see a bottom right now.

Many reasons exist, but the most obvious is the growing competition from Eli Lilly. Mounjaro and Zepbound have proven strong counterparts to Novo’s Semaglutide-inspired Ozempic and Wegovy.

Most Novo investors are waiting for pipeline breakthroughs or better-than-expected results, neither of which we’ve had recently.

While guidance revisions over the past two quarters have been encouraging, the latest CMD fell short of expectations, offering neither a near-term catalyst nor a compelling guidance. More on that later.

Competition with Lilly

This rivalry has been talked about a lot, but the development over time matters more. Novo effectively created the modern obesity-drug market when Wegovy was approved in the US in 2021.

At the same time, Semaglutide was a big step because it delivered better weight-loss results than existing drugs on the market. The cherry on top was that Novo basically had the market to itself.

These were fun times for Novo, but that changed when Eli Lilly entered the market with Tirzepatide. Mounjaro was approved for diabetes in 2022 before the same drug was approved for obesity by the end of 2023.

Novo’s free run lasted less than 24 months, and it didn’t convert the opportunity fast enough.

Why? Tirzepatide provided better weight-loss data, even in head-to-head trials. The commercial impact came quickly as Eli Lilly captured significant market share throughout 2024.

At the same time, Novo struggled with supply chain issues and, most likely, its direct-to-consumer model. By the beginning of 2025, Eli Lilly overtook Novo, something Novo also admitted in its FY25 annual report.

Adding to the pain was competition from compounded Semaglutide copies during the shortages. Funnily enough, it did not seem to bother Eli Lilly. All of this created a perfect storm.

CagriSema was supposed to help Novo close the gap with Lilly, but the results were less decisive than expected. It delivered 22.7% weight loss in REDEFINE 1, below the 25% ambition.

In February of this year, CagriSema achieved 23% weight loss compared with Tirzepatide, but it failed to show it was roughly as effective.

This explains why Novo is now not just betting on a multi-blockbuster follow-up for Wegovy, but rather broadening its pharma platform.

Novo has nevertheless (despite all the headwinds) shown signs of regaining momentum. Based on the CMD data, its US branded prescription share rose from 32% in January to 40% in August. Its Wegovy pill is doing really well, for now.

Pipeline and approvals

As mentioned before, this isn’t an in-depth look at all the trial results and drug approvals, but we can’t make such an update without briefly touching on them.

The “disappointing” pipeline results and approvals are part of why Novo’s stock performance has been lackluster.

However, there were some strong breakthroughs in the past quarters. The most noteworthy of course being the approval of the Wegovy pill.

The Wegovy pill was approved in the US in December 2025, and it has been the strongest GLP-1 launch ever.

Late July already showed 5M+ prescriptions. By August, it was steady at ~170k weekly prescriptions (IQVIA) and about 35% of all Wegovy prescriptions, roughly 5x Lilly’s Foundayo.

On top of that, Wegovy HD (the 7.2mg version) was approved in the EU and US, showing ~20.7% weight loss.

Cagrisema showed some good results vs Ozempic (14.2% vs 10.2% weight loss, better HbA1c ), but failed to impress vs Mounjaro. At full dose, it fell short on weight loss in obesity (20.2% vs 23.6%) and on blood sugar in diabetes. The comparison to Eli Lilly matters most, because that’s where Novo is likely to lose market share to.

Amycretin (now named Zenagamtide ) also showed decent results. It showed up to 14.6% weight loss in people with diabetes after just 36 weeks. This is the real next-gen bet, but Phase 3 data won’t arrive until 2028–29, and tolerability is unconfirmed. So this one won’t move the needle in the near term.

There were also some clear misses:

• First the big one, Cagrisema’s Phase 3 head-to-head trial missed its primary endpoint. It achieved ‘’only’’ 23% weight loss over 84 weeks, failing to beat or match Eli Lilly’s Zepbound (Tirzepatide), which achieved 25.5% weight loss. The market hated it. The study was initiated by Novo and simply failed to impress.

• Last November Semaglutide failed in Alzheimer’s. This was quite a big hit, as there were strong hopes that this could be a great diversifying angle into a new market.

• The ZEUS trial for Ziltivekimab (heart/inflammation) also failed in July. Two more trials were stopped in September, and an impairment is coming in the Q3 report.

• Monlunabant (which is oral cannabinoid receptor 1 for obesity and metabolic disorders) was killed, with a DKK 4bn write-down.

In the next few months, we can expect the CagriSema FDA decision and the Ozempic pill 25mg decision.

Pricing issues

Another core issue Novo is currently facing is pricing pressure. They are being hit from multiple angles and struggle to offset it through volume increases.

The key reasons for the price pressure:

• The MFN deal that was signed last November. Ozempic and Wegovy dropped from $1,000 and $1,350 a month to $350 through TrumpRx.

• Novo’s self-inflicted price cuts: Self-pay pill prices now range from $149 to $299 a month depending on the dose.

• From 1 January 2027, Novo will lower the list price of all Wegovy and Ozempic doses to $675. That’s roughly a 50% cut for Wegovy and 35% for Ozempic. Novo expects it to affect its 2027 cash flow materially.

Guidance raise

Novo came into 2026 with cautious guidance on the back of expected pricing pressure, competition and loss of exclusivity in some international markets.

None of the original headwinds subsided, but the company experienced higher than expected Wegovy pill sales and improved momentum in the US market as the year progressed.

That’s why management was able to raise guidance in August (during the Q2 earnings release).

Adjusted sales and operating profit growth is expected to land between 0 and -6%, instead of the -4 and -12% range. Although this is a vast improvement, the company will still have to aggressively price their products. These increased volumes are an absolute necessity for Novo.

Coming back to the Wegovy pill, the company has executed well on the launch, and the numbers back this up. Compared to Eli Lilly’s launch, Novo’s Wegovy pill is the bright spot in the investment story today although it does seem Lilly is catching up quick.

So far, Novo has captured more market share than Eli Lilly in the oral GLP-1 race. For reference, US GLP-1 volumes rose 26% in Q2 2026.

Investors can only hope that the company learned from its operational fumbles. At least during the CMD, management acknowledged a few things.

Novo was too slow to adapt to a more competitive and consumer-driven market. In essence, it allowed commercial momentum to weaken. R&D progress was slow and too bureaucratic.

We think the idea of having to address a segment beyond physicians was especially new to Novo. It had to adjust that commercial model to a consumer-led GLP-1 market quickly.

Buybacks

Novo’s buyback track record is not flawless. Below, we outline the capital spent on buybacks and the average share price at the time.

As Novo reached peak GLP-1 enthusiasm and confidence, management plowed billions into repurchasing shares at all-time high stock prices. Looking at things in hindsight is of course easy, but the capital allocation decisions made in the period 2023-2024 look weak.

Going forward, Novo does not seem to commit to a structured buyback program, but rather awaits what excess capital is available. This means management prioritises investing in the business, paying out a dividend and M&A.

We’ll touch on that in more detail in the Capital Market Day section below.

Novo’s rebranding story quickly explained

What changed? The name was shortened to “Novo”, the logo remained but was fine-tuned, and the brand positioning changed to “Lasting Health Starts Now”.

Novo’s rebrand is less about a new visual identity and more about a broader business revamp.

By simplifying the name, the company likely creates a more flexible corporate brand that extends beyond traditional pharma, aligning with its strategy to expand into adjacent therapeutic areas, partnerships, and more consumer-facing healthcare channels.

The timing is, of course, spot on. They are in a tough commercial environment and are forced to pivot their strategy. A new “face” helps them break with the past.

This rebrand is also coupled with a new operating framework they call “The Novo Way”. It focuses on customers, competitiveness, and faster execution.

To us, it sounds like a listing of lessons learned from the operational fumbles they experienced when rolling out the original Wegovy product. From that perspective, this rebranding is a good thing.

Overall, it is fair to say that this rebrand reflects the underlying strategy, which leans on diversification and scale.

Key highlights of the CMD

September 21st was marked on every Novo shareholder’s agenda. It was supposed to be a Capital Markets Day filled with big announcements, ambitious targets, and a look ahead to a future where shareholders would be rewarded for their patience.

Investors were left disappointed, especially by management’s guidance. The market wasn’t feeling it either, sending the stock down 7.7% on the day but now only down -1.4% since.

Let’s untangle the key highlights.

The microphone debacle

Sharp ears noticed a rather unfortunate event during the break at the CMD. A very amateurish incident took place: Novo’s team left the microphone on. Meanwhile, the management team thought they were ‘’free to speak”.

To make matters worse, the following sentence was easily heard:

“We are going through a period right now where it is almost impossible to provide guidance.”

While that, in and of itself, is not a dramatic remark, it directly contradicts the message they were trying to get across. Why are we highlighting this?

We think it’s quite exemplary of how Novo is currently handling things. Management is trying their hardest, but the results are not there, and the company is in a tough position.

This microphone hiccup can be interpreted in two ways:

• Management is totally lowballing their guidance.

• Management is incompetent and has no clear vision for the future.

We believe that it’s a mix of both. Management is probably lowballing guidance, because it’s hard to make clear predictions. But that highlights a lack of company and market knowledge we’d expect from a high-tier management team.

Only time can tell if management is truly lowballing, whether on purpose or not.

Now let’s dive into the numbers and forward-looking statements that management provided.

Ambition and pipeline

Novo is doubling down on three ‘’commitments’’ to drive their strategy: (1) grow and diversify the pipeline, (2) drive sustainable growth, and (3) deliver attractive returns.

On paper, the pipeline looks rather impressive. And Novo aims to convert part of it (risk-adjusted for pipeline failures). More specifically, the company wants to launch more than five multi-blockbusters by 2030, have at least five Phase 3 programs in diabetes and obesity, and another five in other therapy areas.

That conversion should translate into more than DKK 150 billion of risk-adjusted sales by 2035. To put that number in context: Novo generates DKK 309 billion in 2025. Please note, although this looks impressive, we’re looking at a 9-year horizon.

At the same time, the company wants to serve more than 60 million patients and build enough oral GLP-1 capacity to treat ten times as many obese patients as today.

As with any self-respecting pharmaceutical company, the pipeline sits at the center of the investor story. Management argued that the company needs to “reinvent” itself as a more diversified business, beyond the Semaglutide franchise.

This seems to be the right play. Why? Novo faces the loss of exclusivity for Semaglutide in major markets beginning in the early 2030s. That means the growth engine will slow down. Repositioning now to become a pharmaceutical platform makes sense.

Growth targets

This all sounds good in theory, but how much growth can investors expect? In our view, this is where management lost control of the narrative.

In the morning, the CEO described Novo’s ambition as “delivering revenue growth until 2030 in line with industry peers”. That was, to say the least, fuzzy. Which peers? What’s the expected bandwidth?

What made it even more head-scratching was when a hot mic picked up a comment during the break from an unidentified person: “We are going through a period right now where it is almost impossible to provide guidance.”

By the afternoon financial session, the target became more tangible (Finally!). CFO Karsten Knudsen described the ambition as “mid-single-digit CAGR growth towards 2030”. The CFO also stressed that the estimate reflected a range of scenarios around pricing, volume, elasticity, pipeline uptake, and commercialization.

One thing is certain: it did not help the market’s trust in management.

Focus on returns

Many pieces are in place for moving forward. For one, Novo will invest more, meaning R&D is set to grow faster than sales as the company builds the pipeline for the coming decade.

But management wants to keep operating margins stable. They aim to offset higher investments through manufacturing efficiencies and further reducing SG&A as a share of sales.

The cash flow story should also improve going forward since we are at the end of the manufacturing investment cycle. Management expects CapEx-to-sales to fall from 20% last year to a mid-single-digit level by 2030. Add mid-single-digit revenue growth and presumably stable margins, and this should support stronger FCF growth.

In our view, capital allocation will be key to future returns. Management prioritizes internal growth but will remain committed to paying a dividend. Not to be underestimated are the pipeline investments and potential bolt-on acquisitions. The company might deploy excess cash through buybacks.

From our point of view, the company should reinvest in the business first and foremost, rather than sprinkle capital across different buckets.

Should you buy Novo right now?

The Novo post-covid investors got to know is gone and won’t be coming back anytime soon. Instead, we’re dealing with a Novo that is an excellent pharmaceutical business at a typical inflection point: patents expiring and a pipeline which is yet to convert. A tough position that requires strong navigation and maybe also some pipeline ‘’luck’’

We believe that as of today, a lot of bad news is baked into the share price. The tepid guidance and uncertainty around both obesity market share growth, M&A success and pipeline conversion are all taken into account at this point.

Purely looking at valuation metrics, Novo doesn’t look all that expensive.

• Forward PE: 12.5

• Forward EV/EBITDA: 8.5

As we concluded before, a large part of this is simply the company rerating to the current state it is in. However, this also leaves room for opportunity. We believe Novo certainly has the potential to return to growth.

It might not be next quarter, but investing in Novo right now is a bet on the future. If and when the company manages to pull consistent growth numbers, a large part of the potential share price appreciation will come from the multiple rerating to higher levels.

Valuation model

We’ve used the valuation model that TacticzHazel normally uses to visualize our projections.

For revenue we started at $45bn. That’s the low end of Novo’s guidance, which now calls for adjusted sales of 0% to -6% at constant currencies. It excludes the one-off $4.2bn 340B rebate reversal booked in Q1, which won’t come back.

For 2027 we assume only 2% growth: Some catalysts that should lead to positive growth numbers are the CagriSema launch and the Wegovy pill rollout to more countries. We expect the projected price cuts to eat away most of the increased sales.

From 2028 onwards we use 5% a year. That’s below management’s guidance in the CMD, but we want to lean cautious. We are in the ‘’let’s first see’’ mode before we give them credit for higher numbers.

Regarding gross margins, they go down from 83% to 80% by 2029. Prices are coming down, and we expect that to continue.

R&D grows steadily, and sales & marketing stays at about 20% of revenue. We also kept $2B a year for M&A, because Novo needs to expand its pipeline before Semaglutide loses patent protection in the early 2030s.

This results in an operating margin that stays around 42%. That matches the one financial promise management made at the CMD: a broadly stable margin through 2030.

Tax and buybacks. Tax is 22%, close to the 21.5% Novo paid in 2025. The share count falls 1.25% a year, starting from 4.42bn shares. That’s a bit slower than the current DKK 15bn buyback pace, because net debt is rising.

Dividend. Novo pays out about half its earnings, so we use a 50% payout ratio. At $39, that’s a yield of over 4%.

For the exit multiple, we’ve used a very conservative 13x. That’s fair for the current state of the company, but if they can keep 42% margins, and get back to decent growth, that’s a very cheap multiple that leaves a lot of room for expansion.

This results in a 2031 EPS of $4.42, at 13x this gives a price of $57.43.

• 8.1% a year from the share price alone.

• 12.1% a year including dividends.

Final thoughts

Novo remains one of those stocks that divides investors. Some see this as a deep-value play; others see it as dead money for the next few years.

We ended up somewhere in between after doing the research for this article.

The valuation right seems very forgiving, as has been for the last period. That in and of itself is not enough to make this a screaming buy.

We will patiently monitor the situation and see where management takes us in the next few quarters. What we mean by that: we first want to see structural improvements. Management surprised us with some guidance upgrades, but we need several more improvements like that.

The biggest catalyst is strong Wegovy pill sales, but that alone won’t cut it. We need solid pipeline breakthroughs, strong M&A deals, or just good operational execution.

We believe Novo is fairly valued at this point, and before we change our opinion, we first need good, and more importantly, consistent, improvements in both financial and operational performance.

Thanks for reading, we’d love to hear your opinion!

Burn The Index and TacticzHazel

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

EVS shareholders have had a miserable year. The share price is down a staggering 49% on the back of a guidance cut and ongoing erosion of trust in management.

Nobody had this on their bingo card. Instead, we all expected EVS to continue the momentum it built up over the past 5 years.

How did we get to this point so quickly? And what does this mean for shareholders and investors interested in the business?

Moat & Margins and I teamed up to tackle the most pressing questions. Make sure to subscribe to him in case you haven’t done so. He can boil down subjects incredibly well and get down to the essentials in no time!

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

EVS came into Q3 on shaky footing

The Belgium-based company entered the year on the back of five consecutive years of record revenue, supported by its international expansion, technological innovation and growing presence in the live production market.

This was part of a strategic initiative by CEO Serge Van Herck to gradually reduce the company’s dependence on the cyclical sports calendar, which resulted in strong financial performance in years featuring major sporting events, but weaker performance in other years.

2026 was shaping up to be a good year. With both the Winter Olympics and the World Cup on the agenda, EVS was well positioned to benefit from increased demand.

Its Big Event Rental activities supported revenue growth during the opening months, while the integration of its new T-Motion division broadened its offering beyond traditional live production and replay solutions.

First Signs of Trouble

In May of this year, a couple things happened. For one, insiders sold €1.9 million in shares shortly before the first quarter trading update.

At the time, not alarming. In hindsight, many investors will look at that move differently.

The May trading update communicated two things. For one, it flagged that geopolitical tensions and macroeconomic uncertainty could delay customer investment decisions.

Management, however, stuck to its original guidance.

In addition, it was also announced that the CFO, Veerle De Wit, would leave EVS. She was held in high regard by the investment community, so it goes without saying that the market did not like the news.

Then came the H1 results published in August. And as management flagged during the Q1 trading update, the picture was mixed.

Revenue reached €107.2 million, an increase of 16.8% YoY. Excluding the impact of Big Event Rental, revenue growth was a modest 3.7%.

Net profit rose by 24.4% to €16.5 million, while EBIT increased by 5.5% to €15.6 million. However, order intake declined by 18% to €85.3 million, reflecting the timing of major-event business as well as weaker demand in the Middle East.

Again, management confirmed its full year outlook at the end of August of €220 million to €240 million in revenues and EBIT of €40 million to €50 million, highlighting that they expected to convert a lot of the pipeline in the second half of 2026.

Finally, the Guidance Cut

Exactly 7 weeks later management came back on its full year guidance. A 14% cut at the mid-point, and so much uncertainty that a guidance on profitability is only possible in November:

September order intake was significantly below expectations, reflecting a deteriorating commercial environment and continued delays in customer investment decisions.

Approx. 25% of the commercial pipeline expected to convert into orders during the 4th quarter was pushed back into 2027, while several customer projects were cancelled altogether due to budgetary constraints.

The writing was on the wall, as some might say.

The fallout

We don’t want to necessarily look at the stock price crash. That’s just the symptom. What demands a closer look are two things.

For one, management’s actions harmed trust between them and the market. The insider selling spree in May right before the quarterly update is in part being investigated by the FSMA. It might all be well within the law, but it sure does not sit well with investors.

Also, hanging onto the guidance based on - in part - historical conversion rates of the pipeline was a miscue. Those historical conversion rates do not apply in a vastly different environment (which management highlighted themselves).

It is surprising to review earlier statements and read the level of confidence with which guidance was defended, only to shelf it 7 weeks later.

Beyond management, a second item to consider is EVS’ competitive position. They used to be the absolute front-runner in their niche. But traditional television is having a hard time, live productions are still going strong, but AI is playing an increasingly important role.

Just look at this weekend’s Singapore F1 GP camera transition between a pit lane and cockpit view.

The key question: is EVS also a front-runner in software development and AI applications? That case is far less proven than their original broadcasting technology moat.

To be clear: EVS is not going anywhere. The company still commands a strong market position, but the rapid changes in the industry, combined with management significantly lowering guidance does mean the company is not untouchable either.

Valuation

After the sharp decline in the share price, EVS’ valuation has naturally become more attractive. There are valid reasons for that, as we discussed above. Greater uncertainty often means investors are willing to pay a lower multiple.

At the current share price, EVS trades at a P/E of just 6 and a price-to-free-cash-flow ratio of 7.6. The latter is its lowest multiple of the past decade.

But these figures come with an important limitation: they are based on historical financial results. They do not tell us what earnings and cash flow will look like after the guidance cut. A low multiple becomes less attractive if the profits underneath it are falling.

For example, if earnings were to decline by 30%, a P/E of 6.3 would become roughly 9 at the same share price. That is an illustration, not a forecast, but it shows why we should be careful about calling EVS a bargain based on past results alone.

Meanwhile, the falling share price has pushed up both the free cash flow yield and the dividend yield. At first glance, that makes the stock look very interesting.

Given the uncertainty, our preferred tool here is a reverse DCF. Rather than starting with a growth forecast and calculating a fair value, we work backwards from the share price to estimate the free cash flow growth the market is pricing in.

We can then assess whether that expectation looks achievable. This reduces our reliance on making a precise growth forecast in an increasingly uncertain environment.

In 2025, EVS generated €21.4 million in free cash flow, a relatively weak result compared with previous years. Shares outstanding amounted to 13.4 million.

Using that starting point and a 12% discount rate, which we consider appropriate for a small Belgian company facing significant uncertainty, the current valuation implies free cash flow growth of just 3%. Lower the discount rate to 10%, and the market is effectively pricing in no growth at all.

Those expectations do not look particularly demanding. However, the outcome depends on whether €21.4 million is a reasonable starting point for future cash generation.

Despite the guidance cut, we expect free cash flow to decline only modestly this year, partly because 2025 already provides a weak comparison. Beyond that, the growth outlook remains highly uncertain.

Product mix is one factor. The shift from traditional television towards streaming is another. EVS remains a leader in its established niche, but that does not automatically make it a leader in software and AI, which we expect to play an increasingly important role in the industry. These developments make its future earnings power harder to assess.

The valuation multiples look attractive, but they reflect past results. If earnings start to shrink, the stock could quickly be trading at around 10 times earnings without any increase in the share price.

Next steps

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

Accenture has been a talking point for months as part of the broader AI discussion. Every indication of weak results led to a strong drawdown.

To put this into perspective: ChatGPT launched on November 30th, 2022. Since then, Accenture’s stock price went from hero to zero, declining 33% in the process.

Just last week, Accenture published good Q4 results, supported by a decent outlook. Despite the results, the conversation quickly turned to the next AI-driven concept which is expected to attack the business model: Forward-Deployed Engineers (FDE).

There’s a lot to digest for investors: What do the Q4 results and guidance mean? And how will FDEs impact the business?

Here are my thoughts and next steps.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

Accenture ended the fiscal year on a high

In FY26 (if you’re confused, Accenture’s FY runs from September until August), Accenture outperformed its initial guidance by delivering 5% revenue growth, mainly driven by large-scale deals (141 client bookings over $100 million).

Accenture closed out the year with a strong Q4, delivering 7% revenue growth, exceeding the high end of its guidance. Net bookings increased 5%, leading to a healthy 1.2x book-to-bill ratio.

Demand was - as expected - tilted towards managed services (book-to-bill of 1.4x). This, together with a 2.5% share count reduction, propelled 8% adj. EPS growth.

Looking into FY27, management targets 3% to 6% revenue growth, with M&A contributing 2.5% as approx. $3 billion in previously delayed cybersecurity acquisitions close. That means only 1% to 4% organic growth. Quite soft.

Free cash flow (FCF) remains to be impressive. Also in the coming fiscal year, Accenture expects FCF to land between $11 billion and $11.8 billion.

This is in part already reflected in the valuation. A 14.9x FWD PE, and very low reverse DCF of 1.5%, as well as a 7% FCF yield indicate that much of the pessimism is baked into the stock price.

It’s not expensive, definitely fair value, maybe even cheap.

The danger in Forward-Deployed Engineers

Let’s start with the basics. Accenture’s model leans on selling and managing large transformation programs. Think implementing an ERP system, reshuffling the organisation, etc.

For this to work, you have large teams supporting the implementation, integration, testing and operations. It’s a complex, politically-charged, and high-stakes game.

These programs would often run in collaboration with partners such as SAP or Workday, just to name a few. There are playbooks for every problem and every software vendor.

But things are slowly changing. For one, AI deployment allows for smaller teams of strong engineers, supported by e.g., coding agents to do the work previously done by dozens or more people. Yes, there are productivity gains, but that would also mean less services revenue.

Adding to the pressure on the existing business model is the build-up of Forward-Deployed Engineers (FDEs). The term was popularised by Palantir.

To keep it simple: instead of just selling software and leaving the customer to implement it (the typical SAP-Accenture collab), highly technical engineers from, e.g., Palantir, work directly inside the client organisation.

They combine engineering, product thinking and consulting to turn an unclear business problem (“what are we doing with AI?”) into a working production system.

And that is a fair solution, because AI is new, companies are often not equipped (non-existent data lake is a typical example). There is definitely a case to make for FDEs.

The bear case dictates that this leaves Accenture out of work sooner than later. I think there is merit to that argument, but it is a bit stretched.

I think Accenture is currently pushing very hard to embed themselves into the value chain. Just look at all the collaborations to scale AI with major stakeholders like Google, Nvidia, Palantir, and just announced today: Dell Technologies.

The argument is that new technology needs specialists to ramp up and successfully deploy, initially. Once this is done, Accenture can step in, and run a similar playbook as they have done during the Cloud cycle: standardise, repeat, scale and leverage relationships with the largest enterprises.

In this case, FDEs are the front-runners, but not the entire value chain. It would play directly into Accenture’s strengths. The value capture would have to come from industrialising AI deployments, rather than the typical implementation work.

Lastly, running large-scale projects also requires internal alignment, project management, value capture offices and political finesse. I doubt that these are the activities the AI tech companies want to keep in-house.

The most plausible outcome is that FDEs reshape Accenture’s model, and how it can monetise its strengths, rather than make the company obsolete.

My Next Steps

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

Innoscripta, one of our portfolio holdings, had a terrible week to say the least.

I’m briefly going to walk you through what happened, where we are today, and share my next steps.

Today’s article is a bit of a short one. I don’t want to speculate too much or draw conclusions. We’ll have to wait and see how things develop.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

October 1st: Ad-hoc disclosure by Innoscripta

An unexpected disclosure during trading hours never bodes well. And the one on Thursday afternoon was no different.

In plain and simple terms: Innoscripta said its offices were searched as part of an investigation into whether employees may have helped clients obtain research tax benefits they were not entitled to.

Here’s the full announcement:

It goes without saying that my jaw dropped on the floor when reading this. And apparently I wasn’t the only one because the market ditched the company shares, leading to a drawdown of over 50%.

I decided to hold my shares because I did not expect this to be a company-wide issue, but rather focused around a handful of employees (if the allegations are true). It frankly also just surprised me. This was definitely not on my bingo card.

It’s not the most prudent risk management on my part, but I rather wait for the facts, avoid panic, and make informed decisions.

October 2nd: Corporate communication by Innoscripta

Innoscripta communicated a second time with the market on Friday after trading hours. Here is the link.

In it, the scope became somewhat clearer. Please read it yourself, but here’s my understanding:

• The investigation concerns applications by individual customers

• At least one employee connected with the relevant matter has not worked for Innoscripta for several years

• No transactions from the 2026 financial year are affected

• Normal operations continue

In light of events, I see this as “decent” news. Of course, it remains to be seen what the exact scope is, including the amount of involved employees, customers, and the eventual financial impact.

What I did not mention yet, is probably the biggest risk: reputational damage. As a reminder, Innoscripta earns revenue when customers receive R&D expense refunds. It directly impacts their revenue model.

And I want to reiterate: at this point it is a suspicion, not a proven fact.

My Next Move

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

The Burn The Index portfolio launched in May 2026 and exists out of five positions. So far, we have generated a return of 20.8%.

If you would have invested the same amount of money on the same days in the S&P500, your return would have been 2.8%.

Our goal is clear: outperform the S&P500 by owning undervalued quality businesses with an attractive growth outlook.

In this month’s update I will walk you through the performance and major updates from the companies in our portfolio.

🧾 Transactions

There were no transactions this month because none of my watchlist targets converted to a point where I think it would be interesting to add them.

Investing is, at the end of the day, lots of sitting around and doing nothing 😉

This is where the non-subscriber section stops. Beyond the free subscriber wall you will find:

• The portfolio holdings

• Performance and major updates in September

• My next steps

• Something worth your time!

📈 Performance

This section is for free subscribers only.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

Ashtead Technology (Ashtead), one of our portfolio holdings, received a non-binding indicative proposal from Ember Infrastructure Management (Ember).

The proposed price per share is £6.15, implying a potential 72% realised gain on our investment (cost basis of £3.56 per share).

That sounds great at face value. But is this a good deal for shareholders? And where in the M&A process are we exactly?

Let’s get started.

Ps. I wrote a deep-dive on Ashtead providing you with a better understanding of the business. In addition, here’s the trade alert I sent out to subscribers in August with the transaction details.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

The Non-Binding Proposal Details

Here’s the communication sent out by Ashtead:

If this all sounds like gibberish, don’t worry. I got you covered.

Basically, Ember has been trying repeatedly to buy Ashtead. The company rejected its first two attempts outright. Apparently the fourth non-binding offer was attractive enough to proceed to the next step.

Ember’s current proposal is £6.15 cash. Ashtead has not accepted that price, but it is sufficiently interested to give Ember preliminary due diligence access.

My initial thought was: why on earth would you communicate a potential deal at a pre-DD stage? Turns out there was quite some press speculation, after which Ashtead confirmed that the process is real, and ongoing.

Ember now has until October 21st to commit, walk away, or obtain an extension.

Valuation and My Next Move

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

Novo hosted their Capital Markets Day earlier this week, and it is fair to say that investors were left disappointed as management’s guidance was underwhelming.

That is on the back of multiple hyper-growth years, a stock decline of over 70% from its 2024 all-time highs, intensifying competition and a looming semaglutide patent cliff for selected countries.

In a way it is counterintuitive, because Novo is still a best-in-class business, with a rich pipeline and a major position in the fast-growing obesity care market.

There’s a lot to digest. Here are my thoughts and next steps.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

Novo Came into the Capital Markets Day with Momentum

Let’s briefly rewind the clock.

Novo had a really tough 2025. Supply and execution issues, compounded GLP-1s and increasingly strong competition from Eli Lilly all weighed on its US obesity franchise.

In addition, the US forced both Novo and Eli Lilly to reduce prices for obesity products. That puts a brake on how fast Novo can grow revenues in this segment.

So, in Q2 earlier this summer, Novo posted relatively decent numbers. Adj. sales grew 7% at constant exchange rates, while adjusted operating profit increased 11%.

Management also raised FY26 guidance and now expects adjusted sales and operating profit growth between -6% and 0% at constant exchange rates.

The more interesting development was the roll-out of oral Wegovy. Weekly US prescriptions passed 265,000 in July outpacing Eli Lilly on a relative basis. Novo is capturing 80% of new oral prescriptions. Not too bad right?

The Key Takeaways From the Capital Markets Day

There’s a lot to unwrap here.

For one, Novo is betting heavily on obesity prescriptions. It plans to increase oral GLP-1 manufacturing capacity to serve 10x more customers until 2030.

It’s also clear that management is going all-in on the oral drug version, at a lower price point, but at scale. Operational execution is at the centre of this. Given that the old management fumbled the ball last time around, investors remain cautious.

Then there is CagriSema. Expectations for this weight loss drug were very high, but disappointed at first. Latest results were, however, better. I think Novo realises this does not need to be another Wegovy, but simply an improved products that reinforces their competitive position.

Another elephant in the room was the patent cliff around Semaglutide. This is one of the most successful pharmaceutical franchises ever created, and Novo needs a plan to replace it.

Novo’s reply is a rich pipeline of potential blockbuster drugs. The company has CagriSema, cagrilintide, zenagamtide, several oral candidates and potential monthly treatments.

Outside obesity, it is expanding into cardiovascular, liver, kidney and other metabolic diseases. Management expects at least five Phase 3 programmes in obesity and diabetes and another five outside those areas.

It’s clear that Novo wants to turn a semaglutide franchise into a metabolic disease platform. Of course for investors, this means huge amounts of uncertainty, and a stark contrast with the booming business times just a few years ago.

In short: Novo is reverting back to becoming a pharmaceutical platform, rather than a blockbuster-driven business it was just a few years ago.

Management’s medium-term growth ambition was the perfect personification of this tricky situation, aiming at mid-single digit growth until 2030. Not good at all.

M&A is another option. Novo reiterated its preference for bolt-on deals, although management also made clear that the balance sheet can support larger transactions.

M&A can be accretive but also value destructive. We’ll have to see how this pans out. It’s another option, but the uncertainty is as high, if not higher, than a pipeline full of potential blockbuster drugs.

My Next Move

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

A fire breaks out, the fire extinguishing system actives and puts out the fire. Production is stopped, repairs are made. Very expensive.

Now imagine a system that prevents all this, and extinguishes the threat before a real fire breaks out. Well, Firefly AB is a company that develops these systems.

I spoke with the CEO of this Swedish small-cap and we deep-dived into the systems, competition, innovation, go-to-market, and capital allocation.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

The Interview

How would you describe Firefly's business model, product offerings, and revenue drivers?

Firefly is developing and manufacturing intelligent fire protection systems for industrial applications.

Our solutions can be categorised into two areas. Preventive systems, where we detect ignition sources like sparks and hot particles and extinguish before a fire starts. Next to that, we also have Protective systems that can quickly detect and suppress active flames in a machine or a high risk area.

The core value proposition is to detect and suppress ignition sources and fires as early and as quickly as possible, helping customers avoid or significantly reduce fire damage and costly production stops.

Our purpose is “Saving Lives and Keeping Customers in Production,” and many customers invest in Firefly not only for fire protection, but because it helps them keep their production running and avoid unplanned downtime.

The system reaction time is really the key to minimize damages. In our industry, every second matters. The faster you can detect and suppress a fire, the less damage it will cause and the faster the customer can get back to normal operations.

Many of our detectors can detect flames or ignition sources within milliseconds. In our preventive systems, the total reaction time from detection to suppression is typically 100 to 300 milliseconds.

For our protective systems, we can detect a fire and activate a full water mist zone covering a 50 meter long machine in less than five seconds. That level of performance is unique and plays a critical role in helping customers avoid major damage and production downtime.

Got it. But it seems one is a requirement, but Firefly systems serve as a sort of “insurance policy”?

Unlike standard fire protection, which is driven by regulatory compliance, our primary driver is financial risk management. Unprotected industrial machinery (e.g., in tissue or wood processing plants) suffers frequent small fires causing downtime costs upwards of €20k per hour. Firefly solves that problem by limiting collateral damage.

We think this investment in a Firefly system repays itself. In short, we found our niche in this area.

As to our revenue model, it is straight forward. We generate revenue through tailor-made system sales as well as recurring aftermarket service and annual maintenance.

It’s hard to imagine a system like that. How are they installed and customised on customer machines?

We place detectors at strategic locations around client machinery (such as press in-feeds, out-feeds, and midsections).

System parameters (including flame size detection, temperature monitoring, and visual scope) are customised based on risk density and customer budget to ensure the system can do an early intervention. That way, it reduces the risk of collateral damage.

Overall, this is a close collaboration with the client. We need to understand how the machine works, and based on our experience we can point out the potential “danger zones”. The in turns allows us to design a tailor-made solution.

I read that Firefly is not the only company doing this. What’s the competitive moat, if any?

In spark detection, primary competitors include German firms like GreCon and Minimax. In protective quick suppression, we compete against general fire engineering integrators.

I think our competitive advantage exists out of a few components. It’s the sum of the parts that makes the difference:

• In-House product ownership & design: Firefly owns its product designs and patents, assembling, calibrating, and testing core products in-house while outsourcing basic components like PCBs (Printed Circuit Boards).

• Harsh environment optimisation: Firefly custom-engineers detectors to withstand extreme conditions (such as high heat, dirt, and infrared radiation in tissue plants) without generating false alarms.

• Ultra-fast integrated response: While third-party integrators rely on generic off-the-shelf alarm panels with close to a minute reaction delays, Firefly’s proprietary panels and flame detectors operate synchronously within approx. 3 seconds.

This seems like a complicated product. And you sell it in multiple regions. What’s the sales and distribution strategy?

The company’s overarching strategy is to sell directly to customers whenever possible, as this gives us the best control of the customer relationship. However, local presence is highly important, so in markets where we do not have our own local organisation, we work through carefully selected agents or distributors.

To support international markets, Firefly relies on multi-lingual internal teams paired with certified local service partners who conduct mandatory annual maintenance visits.

So, there is a big education part to it? That’s tricky.

Selling a Firefly system is quite complex because it’s not a standard product that you can simply install and switch on. To design the right solution, you need a deep understanding of the customer’s process, machinery, operating conditions, and fire risks.

We need to identify where ignition sources can occur, how material flows through the process, and what the consequences of a fire or production stop would be. Only then can we recommend the most effective solution.

In many ways, we are selling know-how and risk reduction as much as we are selling hardware. That’s why technical expertise, application knowledge, and close collaboration with the customer are such important parts of our sales process.

What is Firefly’s strategy for expanding in the US market?

We’re establishing a direct presence in North America, building out a dedicated in-house service organisation first, followed by direct sales reps.

I believe the US market opportunity is huge and still under-penetrated for Firefly. We have strong local distributors today and intend to continue working with them. The market is large enough for all of us to grow, without materially cannibalising each other’s business.

And what about China, and Asia?

The Asian and Chinese markets are currently slow due to heavy exposure to the wood-based panel and woodworking industries. This sector is experiencing a downturn caused by elevated energy prices, increased costs for oil-based adhesives, falling commodity prices, and weak export demand in the Middle East. You can call it a perfect storm.

How does Firefly approach product pricing and margins?

Firefly positions itself at the top of the market in both technology and pricing, maintaining stable premium margins. The company actively avoids low-margin projects or extreme price-discounting environments.

Pricing in general has remained stable, which is good to see. It implies the product works and the value proposition is there.

You bet on innovation as well. The automated water cannon was recently introduced. Is this an add-on to an existing product?

The automated water cannon was developed to protect open, unroofed, or bunker storage areas (such as recycling plants) where water mist systems cannot be installed.

It specifically addresses emerging hazards like lithium-ion battery thermal runaway in recycling shredders and storage piles. Driven by flame detectors, the cannon directs an oscillating water spray around fire zones. It also serves as an easily understood “door opener” product to acquire new recycling customers.

Prediction is the latest technology which is gaining traction. What is Firefly doing here?

“Prediction” is an emerging technology layer positioned before prevention. If you collect raw data from existing infrared detectors and adding sensors (e.g., vibration, temperature), Firefly can analyse operational trends to forecast equipment friction or raw material anomalies before ignition sources occur.

We see Prediction as a complementary area to our core offerings in Prevention and Protection. It delivers clear customer value at a relatively low incremental cost. Because it relies primarily on software integration into existing hardware, it has the potential to generate very attractive gross margins.

Last one. What is Firefly’s strategy regarding capital allocation, cash reserves, and M&A?

We maintain a disciplined capital allocation strategy. For one, we have a cash buffer of 5% of turnover to maintain financial flexibility, or to cover an acquisition.

We do run an active M&A pipeline, with a focus on acquiring complementary product technologies or regional capabilities.However, we are very selective.

Any acquisition must fit very well with our existing business and strengthen our market position, technology offering, or regional presence. At the same time, we remain disciplined when it comes to valuation.

We are interested in creating long-term value, not simply doing deals for the sake of growth. Our dividend payout is also important. One of our financial targets is to distribute 2/3 of the profit after tax annually in dividend.

Valuation

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.

Shareholders must’ve blinked twice when they read the news. Finally some of that massive cash pile is being deployed on something other than buybacks.

Investors were happy, excited, hopeful and depressed. All in one day:

Here’s my take on the results and the acquisition, as well as my next steps.

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

Copart Q4 Results Were Not Convincing

The Q4 results were really just a confirmation of what was already developing in Q3. Revenue growth was moderate (up 2.4% YoY), driven by higher average selling prices (ASP). Volumes dropped, especially in the US.

The volume drop is driven by two factors really. For one, insurance premiums have risen over the past years, leading to fewer collisions claims and higher deductibles. In other words: the consumer is stretched and saving money where possible.

In addition, Copart lost a US insurance customer. When asked about it, the CEO downplayed it as “nothing to see here”, rather than give a straight forward answer. He might be right, but the messaging fell short of being unambiguous.

Gross profit margins dropped approx. 4.5% on the back of accelerated upfront spending on new strategic offerings like long-haul delivery (Copart Delivered), Title Express, and wholesale facilities.

At the same time, operational costs increased 12.7%, and interest income decreased because of the big buyback program earlier in the year. After all was said and done, diluted EPS went from $0.43 in Q3 to $0.35 in Q4.

On the bloated operational cost per vehicle, Jay Adair, the CEO, flagged two measures: direct cost management and unit volume leverage.

It’s fair to say that Q4 wasn’t pretty. However, none of these headwinds are structural in my opinion, but rather temporary in nature.

Costs are something you can contain, the consumer will come back when the insurance market gets softer again, and investments in strategic offerings hurt short term, but will drive growth over the mid- to long-term. Losing a customer is not something I was waiting for, but it does not seem to be a systemic issue.

The Logic Behind the ACV Auctions Acquisition

For those who are not familiar with ACV Auctions, its main product is a digital marketplace where dealers and companies (like banks, fleet managers, and rental car firms) trade used cars, backed by real-time data so buyers know what they’re getting.

The company also offers services that support the whole process, such as transportation, dealer financing, and software/ AI tools to inspect vehicles for damage, help dealers buy cars directly from consumers, and give up-to-date pricing and condition information.

Copart will acquire ACV Auctions in an $1.9 billion all cash deal which is expected to close at year end. Copart will have $2.6 billion in the bank after this acquisition, which is a comfortable position to be in.

ACV will generate approx. $800-850 million in revenues and a net loss of approx. $60-65 million for FY2026. Management expects to be breakeven in 2027, and profitable from 2028 onwards.

Now for the important part. Why ACV Auctions? Well, Copart gets a much deeper, real-time picture of a vehicle’s condition and pricing across the used-car market (thanks to ACV’s software and data), as well as direct relationships with franchise dealers it didn't have before.

Guru Gems wrote an interesting take on this as well:

For ACV, the win is capital and scale. ACV has been growing fast but operating at a loss, and being merged with Copart, a company with a fortress balance sheet, removes a lot of financial pressure. It gives them additional breathing space to develop a great product. ACV also gets access to Copart's massive physical network (over 275 locations) and international buyer reach in over 185 countries.

For the combined company, I think the benefit is coverage. Copart's physical, salvage-heavy footprint plus ACV's digital, franchise-dealer-focused wholesale business means vehicles can flow through one combined ecosystem covering trade-in, wholesale auction, transport, and eventual retail or salvage disposition.

Of course, these are all “potential synergies”, so we have to wait and see which ones convert.

My Next Move

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

The data looks good at first sight: net cash position, accelerating free cash flow (FCF) growth, strong insider ownership and an impressive Q2 earnings report.

Let’s dive in!

Welcome to Burn The Index. I look for undervalued quality businesses with an attractive growth profile. Subscribe for free and join hundreds of other investors to make sure you don’t miss out on the next briefing.

Subscribe now

Content

1. Business Model

2. Financials

3. Competitive Advantage

4. Outlook and Valuation

5. My Next Move

1. Business Model

Tången focuses on acquiring Nordic companies with high barriers to entry and recurring revenue streams. They operates under a decentralised governance model, allowing the portfolio companies to run independently.

Management aims to acquire 4–6 companies per year. Their approach follows a typical buy-and-build strategy: acquiring platform companies and scaling through add-on acquisitions. It leans close to the Private Equity playbook.

Tången operates across three business areas:

• Regulatory Expertise (43% of total sales): Companies operating in sectors with high regulatory demands, strict quality standards, and compliance cycles (e.g., communications systems, marine emission control, lighting for hazardous environments)

• Service Solutions (35% of total sales): Companies providing professional services, maintenance, installation, and aftermarket support to industrial and public sector clients (e.g., industrial material handling, container repair services, construction services).

• Industrial Technology (22% of total sales): Consists of niche industrial companies (e.g., road maintenance machinery, specialised surface treatment and paint products, and electronic component sourcing).

Tången sources most of its acquisition targets in-house. That allows them to build long-term relationships with business owners who at some point might want to sell.

Operationally, they run an asset-light, low-capital-intensity model, with CapEx historically around 1% of revenues. Time will tell, but this setup could allow the company to continue its acquisition-driven model on a self-funded basis.

In the lead is Nina Bergman since January 2024, after being in the CFO role since April 2022. The performance of the acquisitions since she was appointed are good. It’s a first positive indication about capital allocation skills, a critical component of a serial acquirers’ success.

Tången Partners AB, the holding above Tången Industrikapital, owns 60% of the company. Shareholders of Tången Partners AB include entrepreneurs and private investors.

In connection with the IPO, senior executives and key employees converted 32,000 warrants from the 2023 and 2024 incentive programs into 206,318 Class B shares, translating into a 0.37% ownership share.

Conclusion: Pass ✅

Tången is a textbook serial acquirer. This business model has historically outperformed the market, by a margin. The focus on portfolio companies in niche segments with high barriers of entry is the right direction because it allows them to defend their market share. Also, management seems to be doing a good job so far, and insider ownership levels indicate alignment with shareholder interests.

2. Financials

The IPO was a game-changer for Tången. They raised SEK 379 million net. The proceeds were used to pay down loans and refinance bank debt, putting the company in a net cash position of SEK 153 million (after bank debt).

We do have to take into account potential earn-outs, lease liabilities, and put/ call options. That would lower the net cash position to SEK 6.5 million.

The goodwill on the balance sheet represents 29% of total assets. That’s higher than most companies, but not abnormal for serial acquirers. If management completes value accretive acquisitions, there won’t be a reason for write-offs. But, given the limited track record, it’s difficult to judge management’s skill in this area.

In short, the balance sheet looks healthy. To facilitate the acquisition strategy, Tången also has to produce ample FCF. Here, we can see that the FCF produced during the last twelve months (LTM) lands at SEK 274 million. That’s a healthy 5.5% FCF yield.

It’s worth noting that FCF can be volatile, since Tången’s portfolio companies may land large orders in a given quarter.

The company does not use stock-based compensation, nor is it diluting shareholders by issuing new shares. A long-term dividend policy is set at 10% of net profits, but I do not find this to be a good policy as the FCF is needed for acquisitions.

Lastly, the p&l. Net profit margins are expanding to above 10%. This is mainly driven by acquisitions with higher margins in the Regulatory Expertise division.

Gross margins hover around the 45% mark, coming from 38% in 2022. Given the business mix, these levels are ok. They should not be falling from this level, especially if management flags that the acquisitions are running at a better margin than the group’s level. That would indicate competitive pressure.

Conclusion: Pass ✅

Clean financial setup with room for investments thanks to the net cash position, as well as decent FCF generation. This should - in theory - allow them to pursue a self-funded acquisition strategy.

3. Competitive Advantage

Competition as a serial acquirer takes place in two dimensions.

On one hand, Tången is competing against other serial acquirers, large corporations looking for strategic additions, and private equity firms.

Here, Tången explicitly mentions their focus on building long-term relationships with owners in order to acquire them without an intense competitive bidding process.

I doubt that this sets them apart. There are many serial acquirers that apply this trust-building method. It’s definitely the right approach, but falls short of being unique.

The second dimension is competition in the underlying industries in which the portfolio companies operate.

Tången deliberately invests in niche companies protected by high barriers to entry, particularly strict regulatory frameworks, compliance cycles, and certification requirements. This makes it difficult for competitors to enter and replicate.

Conclusion: Caution ⚠️

As a serial acquirer, I doubt there is a strong moat. There are multiple investors fishing in the same pond. On a portfolio company level, I do believe they are taking the right approach by focusing on businesses with high barriers of entry. The gross margins underpin this assumption.

4. Outlook and Valuation

Tången’s management is targeting adjusted EBITA growth above 20% over the medium-term (3-5 years). That’s an ambitious hurdle, but it does include organic growth, acquisitions and capital gains from divestments.

On the acquisition side, management said they want to complete 4 to 6 acquisitions per year. Based on the available track record, I think the lower end of that range is possible if FCF generation is strong enough to power the acquisition flywheel.

In addition, the company can still bank on organic growth from its existing portfolio. I assume this will decline to the mid-single digits (H1 26 YoY growth was 16.1%).

Valuing a serial acquirer requires us to look at the FCF development. The company generated SEK 174 million in FCF during H1 2026. Simply doubling that number would be wrong, and lazy to be honest.

Management did point out growth to slow down, but FCF conversion to rise again given Q2 saw some headwinds in working capital. Nevertheless, let us assume H2 FCF to be 20% lower than H2 2025, as the comps for some big portfolio companies are quite difficult in H2 2026.

That means FCF for the year will land at approx. SEK 255 million, a 5.1% FCF yield. It implies Tången has to increase FCF 8% in the long-term to produce a 10% shareholder return. That’s not a though hurdle, and the assumptions are conservative.

I also check the earnings growth. This metric shows you the return we can expect as an investor. Here is the calculation:

Earnings growth = EPS growth + dividend yield + PE multiple (expansion/contraction).

Management expects to grow with 20% annually. I think that is fairly high, so let us assume 15% going forward. They can bank on organic growth, and have firepower to acquire businesses.

They do plan to pay out a dividend, but let us ignore this for now. I think that paying out a dividend as a serial acquirer is not a good idea as mentioned earlier. Also, a PE re-rating seems premature at this stage. Also here, we ignore it.

Earnings growth = 15% + 0% + 0% = 15%

Conclusion: Pass ✅

I think 15-20% should be doable given the track record of organic growth and acquisition tempo as well as returns so far. The valuation is attractive based on FCF and earnings growth metrics. This assumption only stands if the business can reach the high watermark of its growth target, and continues to deploy capital.

This section is for free subscribers only. By subscribing you also receive access to the Burn The Index portfolio and watchlist.

Subscribe now

5. My Next Move

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

This is the place where every Burn The Index holding will originate from.

Watchlist process

I keep my review process simple by starting with the basics. That saves time for the companies actually worth digging into.

Companies end up on my watchlist because they have the potential to become quality businesses with an attractive growth outlook.

You will see that the hurdle for most companies is the price. It goes without saying that I want to add these businesses at an attractive valuation.

The watchlist

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

This Italian yacht builder comes with expanding margins, high single-digit top-line growth, and an owner-operator at the wheel.

Add to that the company’s healthy balance sheet in an otherwise capital-intensive industry, a normalised FCF yield above 5%, and an order backlog of €1.5 billion, and I think it’s fair to say this small-cap could be something of a hidden gem.

What I find especially attractive is the company’s targeted vertical integration strategy, through which it (partly) acquires strategic suppliers and critical distributors.

This gives them better access to constrained resources (ship builders) while also creating room to expand margins.

The valuation is attractive. The company is trading at a FWD PE of 12x, well below the historical average of 17x. FCF-based metrics also show compelling returns.

Up next: Elevator Pitch and My Next Steps.

Elevator Pitch

Sanlorenzo S.p.A. is an Italian yacht builder that designs and produces custom-built motor and sailing yachts for ultra-high-net-worth individuals (UHNWIs).

Rather than chasing production volume, the business operates on a scarcity principle to preserve brand desirability, maintain resale values, and protect margins.

Revenue (H1 2026) is generated through 4 divisions:

What I believe makes the model work is the behaviour of Sanlorenzo’s customers. Around 75% of purchases come from repeat buyers, who upgrade their vessels and spend more with each purchase.

The group is also diversifying: Europe’s share slipped to 47.2%, offset by growth of 35.4% in the Americas and 35.8% in APAC, where the integration of Simpson Marine gave Sanlorenzo a local distribution platform.

The competitive advantage, in my view, stems from the combination of strong brand power and access to a specialised local industrial cluster.

Four Sanlorenzo production sites are located within a 50km radius in Italy’s “nautical district”, giving the company access to a dense network of master craftsmen and specialised suppliers.

Where competitors redesign hulls frequently and erode the resale value of older models, Sanlorenzo holds to a roughly 10-year model lifetime which lowers R&D amortisation, increases capital returns, and protects resale values. It’s quite ingenious in my view.

The shift toward direct distribution gives the company control over pricing, higher margins, and a high-touch tailoring process that makes customers unlikely to “churn”.

Management is experienced and aligned: CEO Massimo Perotti took over the majority in 2005 and has since guided the company’s expansion.

Results speak for themselves:

There’s little to dislike on the financial side. The company runs a clean balance sheet, it has space to make minor M&A moves, the company is profitable and generates ample cash flow. The FCF can fluctuate because there are seasonal effects to consider.

My Next Steps

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.

LeMaitre Vascular was founded in 1983 with the intent to design medical devices that lower the high rate of leg amputations caused by vascular disease.

Fast forward 43 years and you will find that LeMaitre is a household name among vascular surgeons, and quality investors.

The 20% drawdown after Q2 earnings might even make it an interesting investment opportunity. Time to take a closer look!

Content

1. Business model

2. Balance sheet and cash flow

3. Profitability

4. Competitive advantage

5. Management

6. Outlook

7. Valuation

8. Landing the plane

1. Business model

Focus on niche medical devices for vascular surgeons

The company exists out of 3 divisions: biologics (grafts and patches), specialised vascular devices and human tissue cryopreservation services.

The biologics division (approx. 50% of total sales) develops biological (e.g., cow arteries) and synthetic grafts which surgeons implant to create blood flow pathways, as well as organic patches made to repair or reinforce weak spots in blood vessels.

LeMaitre also offers surgical devices (approx. 35% of total sales) which include shunts that keep blood flowing to the brain during neck surgeries, catheters to e.g., clear out blood clots, metal clips to join blood vessels together, and medical tape that shows up on X-rays.

Human tissue cryopreservation services (approx. 15% of total sales) is the third division. Here, LeMaitre processes and deep-freezes donated human blood vessels and heart tissues, under the brand name RestoreFlow.

Here’s a product overview from LeMaitre’s Investor Relations materials:

LeMaitre’s business model centres around the vascular surgeon. They focus on high-margin, low-rivalry niche products and avoid commodity markets.

The company has significant pricing power in these niches. They’ve raised prices over the years (see below), and it has not affected their market share.

A business model driven by a buy-and-build strategy

LeMaitre acquired 25 businesses since 1998. Post-acquisition, they consolidate manufacturing capabilities to improve quality control and to reduce costs.

The M&A track record is fascinating to comb through:

• 16 out of 25 deals worked out well

• The number of acquisitions decreased since 2019

• Company growth is derived from acquired businesses.

LeMaitre deploys a direct sales force that generates over 90% of total sales. Management pursues a “go-direct” strategy, buying out international distributors to establish closer customer relationships, and capture higher gross margins.

To support this direct channel approach, the company is executing a “relocalisation” logistics strategy, expanding local country warehouses in major global markets.

Counter-positioning

Although the broader medical field has shifted toward minimally invasive endovascular techniques, LeMaitre’s business model remains centred on open surgery.

LeMaitre targets vascular surgeons because they’re trained in both open and endovascular techniques.

This gives LeMaitre a strategic advantage: since these surgeons aren’t limited to one method, they can choose whichever procedure best fits each patient’s condition, rather than defaulting to whichever approach they happen to specialise in.

A growing business anchored in the US market

LeMaitre managed to grow sales at a 16% CAGR between 2022 and 2025, from $162 to $250 million. Most sales are generated in the US, with EMEA and APAC at a distance.

That’s to be expected as the US is the largest healthcare and medical devices market globally. And as mentioned earlier on, the vascular surgeon is the key target customer.

Complex supply chain dynamics

Human tissue cryopreservation services faces a complex procuring process because it is restricted and prone to shortages.

Under US federal law, human tissue cannot be bought or sold, meaning LeMaitre cannot hold inventory and relies on independent procurement recovery groups.

To solve for these supply bottlenecks, LeMaitre is removing self-imposed purchasing limits enacted under their AI-driven DonorIQ program.

Conclusion: Pass ✓

This business model is simple and intuitive. I also like the built-in pricing power mechanism. Through centralised manufacturing and localised sales and supply, the company is set up to boost margins while deepening customer ties. The long-term outlook does depend on management’s ability to execute acquisitions well.

2. Balance sheet and cash flow

Debt-free and ready for M&A

The company’s cash position amounts to $359 million. They did raise $167 million in debt in 2025 with an eye on future acquisitions (2.5% interest rate, due 2030).

The net cash position amounts to $190 million. That’s a comfortable position to be in.

Strong operating cash flow with low capital intensity

Operating cash flow reached a high of $74 million, on the back of stronger working capital management (supported by an ERP system upgrade) and increased net income.

I believe LeMaitre is in a solid position to pay down debt and cover interest payments.

Their CapEx profile does not raise any red flags. The main items are property and equipment purchases (cleanrooms, production equipment, operational technology), capitalised costs tied to its multi-year ERP rollout, and building leases.

LeMaitre is not a capital intense business based on these numbers.

Conclusion: Pass ✓

LeMaitre’s balance sheet is strong. There is optionality for M&A and goodwill does not seem to be an overhang. The operating cash flow is robust and serves as cushion to repay debt and cover interest rates. I would feel very comfortable with these numbers as a potential investors.

3. Profitability

Growing gross and net income margins

LeMaitre Vascular’s gross margin has climbed steadily, reaching 71.5% in 2025 (up from 65.4% in 2020). This expansion reflects higher average selling prices, manufacturing efficiencies, and a richer product mix (more grafts, less patches).

Net income margin grew alongside gross margin, rising to 23.1% in 2025 (from 16.4% in 2020). The gains stem from strong operating leverage. Altogether, diluted EPS 2.5x’d between 2020 and 2025, from $1.04 to $2.52.

Mixed dilution picture

Between 2020 and 2025, shares outstanding grew with 2.3% CAGR. That’s still reasonable, but I rather don’t see this at all. It means less profit per share.

Also, stock-based compensation increased from $3 million in 2020 to $7.8 million in 2025 (over 10% of net income). That’s a strong increase. You can argue that results also improved exponentially over the same period.

Strong capital returns

ROIC climbed steadily over the years, driven by strong and improving operational performance. What’s notable is that this happened even as total assets jumped up from a debt-funded cash infusion, which would normally weigh down ROIC.

Conclusion: Pass ✓

Yet again, a clean sheet. Profitability and capital returns are high. Dilution is limited, although I am not a fan of the amount of stock-based compensation.

4. Competitive advantage

LeMaitre Vascular’s competitive advantage is built around the specialised, differentiated and proprietary products they sell. You can see this as the core of the advantage.

Enhancing this advantage is LeMaitre’s strategy to avoid head-to-head commodity competition and focus on specialised product categories (like valvulotomes and carotid shunts). By focusing on low-volume solutions, they keep away big companies with deeper pockets.

Their product scope positions them as the go-to supplier for vascular surgeons. They perceive LeMaitre as the expert, rather than a generic provider.

Conclusion: Pass ✓

LeMaitre’s advantage is the combination of specialised products, a clear positioning towards customers, and a strategic choice to avoid large competitors.

5. Management

Experienced management team

George W. LeMaitre has served as CEO since 1992 and as Chairman since 2004. He is the son of the founder. Dave Roberts joined the company in 1997, was promoted to CFO in 2000, and became President in 2007.

This is a long-tenured team. The results speak for themselves. Especially over the last few years, LeMaitre grew exponentially.

It is also good to see that management rates 16 of the 25 acquisitions to have been successful. Is that a great ratio? Not necessarily, but at least it is very honest. And that is something you should not underestimate.

Alignment is there, but only if the price makes sense

It’s also good to see that insider ownership remains at approx. 6.5%.

Insider trading shows a different picture though. Here’s a snapshot of some very insigthful data:

The red dots reflect sales. I must say, this picture tells me one thing: After the March pop to $110, even management felt that the company became overvalued. And they cashed in, rightfully so.

Conclusion: Pass ✓

I love the honesty in reflecting on successful and bad acquisitions. The team has been doing a good job, and it is clear from the Q2 earnings call they are making adjustments where needed to safeguard margins and expand where possible.

6. Outlook

Across nearly every major vascular procedure category open surgery is being steadily displaced by endovascular methods, with procedure volumes shifting further toward catheter-based techniques each year.

Still, open surgery retains a meaningful niche for patients who aren’t good candidates for endovascular treatment. But procedure volumes do not show the complete story, according to LeMaitre Vascular’s CEO.

He noted that broad healthcare trends aren’t a reliable proxy for LeMaitre’s business, since its typical patient (a 70-year-old on Medicare, not Medicaid) is driven by age-related vascular disease rather than economic and policy forces shaping statistics.

So while industry-wide data points toward endovascular’s rise, it doesn’t necessarily capture the durability of demand within LeMaitre’s niche.

So, that leads us to lean on historical organic growth numbers from LeMaitre, and assume these with the necessary caution going forward. Q2 organic growth was 10%, of which 5% was volume growth (excl. one time effects).

Conclusion: Caution ⚠

LeMaitre seems to be active in underlying markets which are growing mid-single digits in volume. This means pricing power needs to stay strong for LeMaitre to maintain a healthy growth trajectory.

7. Valuation

Sources

• Fiscal.ai

• LeMaitre Vascular Investor Relations resources

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.

The Burn The Index portfolio launched in May 2026 and exists out of five positions. So far, we have generated a return of 17%.

If you would have invested the same amount of money on the same days in the S&P500, your return would have been 3.1%.

Our goal remains clear: outperform the S&P500 by owning undervalued quality businesses with an attractive growth outlook.

In this month’s portfolio update I will walk you through the transactions, the performance, and major updates from the companies in our portfolio.

Transactions

I added Ashtead Technologies to the portfolio on August 20th, after the company revised its outlook downwards due to tensions in the Middle East. The market reaction was ugly (-20% at some point).

This seems to be a temporary issue. With a record-high industry backlog, I expect results to be stable this year, and grow again in 2027.

Ashtead Technologies has been on my watchlist for quite some time, but I was always held back by the valuation. To me this seemed like the perfect opportunity.

An in-depth write-up and investment thesis on Ashtead Technologies is available to subscribers.

A second transaction took place on August 25th, when we added to our existing Innoscripta position.

The company published great results, but a seasonal effect and difficult IT system integration gave investors a big scare. That led to a -15% move, and me buying up more shares.

Performance

Sources

• Fiscal.ai

• Investor Relations resources

• Interactive Brokers

Burn The Index website

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. I may hold positions in the stocks mentioned. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions. Do your own research.

The company was founded in 2000 and went public on Nasdaq First North in May 2018. The Q2 results were good to say the least: SEK 58.7 million in net sales, up 86% YoY (91% currency-adjusted), and a 36% EBIT margin.

Yet, concerns around legislation and sales cyclicality remain. I sat down with the CEO and discussed the burning platforms. Below you will find the interview transcript (excl. the small talk 😉) , as well as my take on the valuation.

The Interview

Hi Markus, great Q2 results. For investors that are not up to speed with I-Tech: can you walk us through the value chain?

Of course. Let’s start from the very beginning. We secured the IP around the industrial-scale production of medetomidine. When I-Tech went public in 2018, we raised SEK 40 million, a part of which was specifically allocated to secure this production IP.

From there, we work with a set of contract manufacturers. We believe that to do manufacturing really well, it must be a core capability. Today, we work mainly with Indian API (Active Pharmaceutical Ingredient) producers. They are among the world’s best when it comes to producing tricky substances cost-efficiently.

I-Tech directly controls the customer relationship, including order-taking and approval. Our distributors typically act as local logistics partners. They handle essential regional services that they excel at, such as customs clearance, intermediate transit, and temporary warehousing.

We plan production based on customers’ forecasted volume offtake. This means there is always product in stock available to be dispatched when we receive a firm customer order. The logistics company then picks up the shipment.

For Selektope, we typically use air freight. This is quite rare within specialty chemicals, where sea freight over long distances is the norm. However, we exclusively use air freight because Selektope is highly active, meaning customers require very small volumes of it, making air transport efficient.

How does the process look like for new build projects?

For new build projects, planning is very straightforward for our customers (the coating companies). The shipyard will specify exactly when they are ready with assembling the ship and when they need to apply the coatings. These timelines are documented and rarely delayed unless there is, e.g., a strike.

Because coating companies operate as logistics and inventory companies at their core, they want to keep their inventory as low as possible. They are masters at maintaining low working capital. Therefore, for new build projects, our product arrives “just-in-time,” making the planning and delivery process very smooth.

What about the maintenance market?

For the maintenance market, it is a different game. This market is about 10 times larger than the new build market simply due to the sheer number of active ships in the world. However, servicing requires local inventory.

A ship owner might call a coating company and say, ”I have some downtime, so I plan to dry-dock and service my ship in China. Can you supply the coating there?” To meet these ad-hoc demands, coating companies must maintain local inventories of finished paint products.

It is important to note that they do not need to keep inventories of Selektope. They just need inventories of the finished coatings.

This dynamic explains the variation in our quarterly results. We experience high and low quarters because the timing of when coating companies plan their production runs can vary significantly.

Sales are impacted by underlying cyclicality. Is that the right way to look at it?

I have not seen much cyclicality in our business. Surprisingly, antifouling is one of the least cyclical businesses because the service market (the far larger market) remains constant. Whether the economy is in a downturn or a boom, ships are required to undergo dry-dock servicing at least once every five years.

The variation in our sales occurs between quarters because customers place large orders to run block production campaigns, rather than spreading their purchasing evenly throughout the year. This leads to strong quarters followed by slower ones. Last year, the slowness was mainly due to one customer’s financial difficulties, alongside some likely inventory destocking as they reduced working capital.

So, “cyclicality” is the wrong way to describe it. Instead, we experience seasonal variation. In the Northern Hemisphere, very little servicing is done during the winter. This is because marine paints dry poorly in cold, damp conditions. In fact, certain coating systems, like silicone-based paints, cannot even be applied below specific temperatures.

But how does pricing impact the sales volatility?

We do not change prices on an order-by-order basis. We have a straightforward, stable pricing structure based on a volume ladder. During the last quarter, we did make some price adjustments, but those were solely to offset raw material cost hikes resulting from disruptions in the Hormuz Strait.

You suggested antifouling’s future may be regionalised as countries adopt distinct regulations. What does that mean for I-Tech?

Our product itself will not change. Selektope is what it is: a single active substance. However, our customers’ products are formulations; they are “soups” of various chemicals, and these formulations will vary by region.

For example, if we are unable to secure regulatory approval under the EU Biocidal Products Regulation (BPR), European-based paint companies won’t be able to produce and sell formulations containing our active substance within Europe for European applications.

To be fair, this is not a massive issue for us currently because the EU BPR has been highly discouraging to innovate. Since the framework was established over ten years ago, very few new coating products have actually been approved. Because of this sluggishness, there are very few products in Europe that contain Selektope, and our European sales are consequently very low.

The real point is that global chemical regulatory frameworks are diverging. This makes it difficult for a customer to offer a single, standardised global paint product that complies with both European and South Korean standards.

What is the situation in South Korea like?

I highlighted South Korea because it is a massive and vital market for the shipping industry, and they have taken a very different path than Europe. South Korea’s local legislation dictates that if a biocide meets certain toxicity criteria, its concentration in the final formulation is capped. For instance, at no more than 1%.

This means future paint formulations complying with South Korean standards will look very different from those sold in China or Europe today.

So it forces formulators to adapt because chemical restrictions directly affect paint performance?

Yes, but the positive side of South Korea’s approach is that it triggers innovation. They are clearly signaling a direction: to lower the total volume of biocides. To achieve this, the industry needs new, highly efficient biocides that can perform exceptionally well even at very low concentrations.

In contrast, European regulations discourage innovation. While the South Korean framework presents challenges for formulators, it also opens up an exciting space for high-performing, innovative technologies.

If the EU still says no, could that cost you the ~2% European sales and create an overhang with other regulators, or is that too far-fetched?

You have to apply a realistic time scale to that scenario. The immediate impact of an EU rejection is that the 2% of our sales currently tied to European applications could be at risk. However, customers can still manufacture coatings containing Selektope inside Europe, as long as those coatings are exported and applied elsewhere (such as in Turkey or North Africa).

The legislation is framed around protecting local European workers and public health, but it allows production for export. So, while that 2% is under threat, it may not disappear entirely or immediately.

Regarding the risk of this regulatory stance spreading to other regions: yes, that threat exists, but regulatory changes occur over a timeframe measured in decades, not years. If a major shipping hub like South Korea were to eventually be inspired by a negative European decision, that could pose a future challenge. This is why Korea remains a very important market for us to watch.

You are planning to enter the aquaculture space. Does this require a different commercial approach, or will it follow the same “ingredient brand” model you established with Selektope?

It is a very equivalent model. There is a slight overlap in customers, but aquaculture also introduces a new group of customers who focus exclusively on that sector.

Our plan is to build this business model very similarly to Selektope. Of course, this is pending customer validation. At this stage of medium maturity, we cannot guarantee it will be a massive commercial success. However, the opportunity is highly interesting. It expands our product portfolio and extends our target market.

Importantly, the pace of innovation in aquaculture is much faster than in commercial shipping. Net impregnation coatings used in aquaculture typically have a lifespan of one season or year, compared to the five-year cycle in shipping.

Playing devil’s advocate: Is this diversification a first step toward safeguarding and broadening the business?

Yes, that is fair. The strategic decision to diversify the company was largely catalyzed by the events of 2023, when the EU proposed restrictions that threatened our core business.

It made us realise that despite doing everything right, a regulatory body can still suddenly cut away at your business foundation. For the long-term health of the company, diversification is essential.

On the positive side, we have built immense expertise in formulating antifouling products, established strong customer relationships, and initiated valuable co-development projects. It makes perfect sense to leverage these assets to bring other interesting technologies to our customers and deliver more value.

Aquaculture is simply the first concrete project from our development pipeline that we are ready to discuss publicly. We have several other projects in our business development pipeline, and we hope to announce more concrete steps toward broadening our business in the near-term future.

In fact, broadening both our product portfolio and our strategic focus was one of the reasons the board selected my profile when appointing a new CEO in 2024. However, to be clear on our current strategy: we remain experts in marine antifouling. This is a highly attractive niche market, and we want to double down on it by delivering more value to our customers.

Final one. What are your takeaways from the last six months?

First, we’ve learned that you must measure progress on a different time scale. In this industry, quarters are too short to draw definitive conclusions.

A major learning relates to how our business interacts with the macro environment. The shipping industry is currently highly disruption-driven. Recent geopolitical events have essentially added fuel to the fire, boosting shipping activity and earnings. When shipowners’ earnings increase, they order more ships.

Furthermore, these disruptions push up fuel prices, which significantly strengthens the value proposition for premium antifouling coatings like ours, as shipowners become highly focused on fuel savings.

Speculatively, a more peaceful world with fewer trade disruptions could actually be negative for our short-term demand. It would mean ships travel fewer total ton-miles because they don’t have to bypass disrupted regions, potentially leading to a shipping downturn and lower earnings for I-Tech. This correlation is a key strategic learning.

On an operational level, we were also pleasantly surprised by how quickly our second-largest customer returned to normal purchasing levels.

Valuation

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.

Innoscripta dropped Q2 results. The market’s initial reaction is ugly with a 10% drop in the share price as I write this article. Let’s dive in.

The Results and Outlook

First, the good news. H1 2026 YoY revenue growth was an impressive 43.2%, reaching €63.2 million. The company maintains a highly scalable model, posting an adj. EBIT margin of 57.7%. Net income increased 54.2% to €24.7 million or a strong 39% margin.

Management also reconfirmed FY26 guidance of at least €140 million in revenue and at least €80 million in EBIT. The company launched in France, USA and UK. The first customers have been signed. I do not expect any tangible results straight away, but I will keep a close eye on the customer count during the next few quarters.

So what drove the market to dump the stock today? Although revenue growth was impressive YoY, it dropped 43% QoQ. And that scared the market.

I think there are two reasons. On one hand you have the typical seasonality impact. When a customer files for a return, the revenue only gets counted the following quarter. Q4 tends to be a cut-off date for recovering R&D expenses from 5 years ago. That means lots of filings pile up in Q4, and get counted in Q1. That’s why Q1 is always a big quarter. Q2 is the opposite: filings in Q1 slow down over the holidays and don’t get back to normal pace until early-to-mid February.

In addition to that, management flagged that a necessary IT migration took place. This acted as an additional headwind for the quarter.

My Next Steps

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. All investments carry risk, and past performance does not guarantee future results. Please consult a qualified financial advisor before making any investment decisions.