Should you keep Saab, or should you buy more, or should you even sell? The question is probably one of the most placed among investors. A lot has happened in recent years and Saab has met a greater demand than anyone could even have dreamed of. It is just as time for the company to report and there is both positive and negative to say about the company.
“If you see a bubble, you do best in running into it and not away from it”
Wasn’t Peter Benson coined that expression in one of the business world’s podcasts long ago? The sick thing is that it is true to many and many. If you have thrown into trends for the last 10 years, it has often been just right.
Above all, it is true in the defense sector where Svenska Saab only this year went +110%.
I have never owned Saab individually and I have stopped digging myself over case I missed. Only through Investor do I own Saab but unfortunately this is a fairly small part of the investment company if you compare with eg. ABB or Atlas Copco.
In any case, Saab reports for its half -year 2025 now on Friday, July 18, and you can, to say the least, say that expectations are extreme for this. Over the past 5 years, the rise including dividends is close to 800%. The market capitalization today is almost 300 billion. It is quite incredible given that the market capitalization was about 10 billion just 15 years ago.
This was the time when I myself made clear and the following year it was not mandatory pattern that applied. The defense would be prioritized down and money would be saved as the world was generally a peaceful place. We do not live that reality in 2025.
The number of shareholders has also exploded as everyone wants to be on the train. There are now over 170,000 customers at Avanza who individually own the share and in 2022 that figure was only 20,000.
Number of owners Saab – Avanza
Factset has compiled the expected profit for Saab during the full year 2025. We count on that forecast and today’s share price so is P/e just over 50. It is a pretty crazy valuation that may not sound very nice, but of course there is a reason for the valuation.
Sweden now has a goal that 3.5% of GDP will be dedicated to military expenses when we reach 2030. This is true that the percentage corresponds to approximately SEK 250 billion annually. Saab has 41% of sales in Sweden and we reach up to 3.5% of GDP until 2030, it would correspond to enormous potential. Calculated on that figure, sales can be quadrupled.
There are clearly yes and no-sayers to Saab. All we have to go on right now is that expectations are extreme, but if Sweden continues and the world equip up it does not have to be a senseless valuation. Then the company can in the long run grow into its valuation.
If you have a big suit, but still eat Christmas tables every day, well then you will also grow into your suit. The same goes for companies that grow so it is cracking. The problem is that both sales but above all profit must increase. Saab has historically been poor at converting sales into profit crowns. This is the big Achilles heel in Saab in my opinion.
On Friday, we have to keep track of whether sales increase by 19% and operating profit by 26%. If you miss that figure, it can probably be a trip down for the share. Sure, expectations are also high on other defense shares, but Saab is in a class of its own.
I who are now starting to look for more high distributors will skip buy Saab. My own theory is that if the renovation continues to be a priority, there may well be more upside for Saab, but I think the biggest cake is already eating.
So. It feels like the biggest geopolitical news has already had their way. What we do know is that 5% of the NATO countries’ GDP will be put on defense by 2035. Of the five percent, 3.5% of GDP will be spent on military expenses and the remaining 1.5% on defense-related investments. I think it is quite unlikely that that figure would be raised unless the world takes another step towards more concern.
If Friday’s report shows that Saab exceeds the analysts’ expectations, the share will rise, but otherwise there is a large downside to wait when a lot of expectations are built in.
To answer the question at the beginning of the post, I think you should remain if you already own shares, but maybe await a larger investment if you are outside. It may sound stupid, but that is at least my way of looking at it.
In any case, Saab is not an attractive share in terms of dividends so I will probably skip dive deeper into this at the moment.
