Goldman Sachs has moved Coloplast A/S to a "sell" recommendation from "neutral," pointing to potential downside for the company’s growth trajectory and profit margins. The brokerage also cut its target price to DKK 435 from DKK 550, reduced the valuation multiple to 17x from 21x and increased the weighted average cost of capital to 8% from 7% - actions that accompanied lower earnings estimates and put downward pressure on the stock. Shares fell more than 2% on Tuesday following the note.
The downgrade arrived against the backdrop of a challenging quarter for Coloplast. Since reaching a peak of DKK 577.4 in mid-January, the equity has given back roughly 25% of its value. The stock is trading close to its year-to-date low of DKK 420.7, reversing a short-lived recovery in late March and reinforcing a technical downtrend that included a decline of over 10% in March alone.
Goldman Sachs said its reassessment stemmed from several fundamental concerns. It highlighted what it described as "downside risk to growth and margin at Coloplast" and flagged obstacles to the company returning to its mid-term organic growth guidance of 7-8%. The bank noted structural change in the U.S. skin substitutes market, rising competitive pressures in Ostomy, and weaker-than-expected momentum in China as key factors that make the mid-term target harder to reach.
On growth, Goldman Sachs projects organic expansion of about 6% in FY26-28e, which sits below Coloplast’s stated 7-8% objective and is close to the company’s 10-year average of 7.0%. The report stressed that the firm expects lower profit progression as well, arguing that the need to reinvest to support growth initiatives and important product launches, together with rising cost pressure, is likely to weigh on EBIT development.
Accordingly, the brokerage trimmed adjusted EBIT estimates by roughly 4% for FY27/28e and said its forecasts are 6-7% below Visible Alpha consensus across FY26-28e. It sees adjusted EBIT margins declining to 25.6% in FY27e from 26.7% in FY26e. Net income is projected at DKK 5,726 million in FY27e versus DKK 5,605 million in FY26e.
Higher input costs were a central theme of the analysis. Goldman Sachs emphasized that raw materials make up approximately 52% of Coloplast’s cost of goods sold and highlighted upward moves in oil-linked inputs and chemicals. The report noted that current oil prices are about 60% above FY25 averages and modelled around 100 basis points of gross margin contraction in FY27e as a result.
The bank also pointed to constrained pricing flexibility for Coloplast, observing that more than 90% of revenue is linked to reimbursement arrangements. That dynamic, it said, limits the company’s ability to pass rising costs through to customers via price increases.
Additional cost pressures include energy and wage inflation concentrated in Hungary, which the report says accounts for roughly 70% of Coloplast’s production footprint. The analysis assumes 15% energy inflation and records underlying wage growth of 8.3% in the year to January. As a reference point, the report recalled that in FY23 a prior period of elevated input costs coincided with a gross margin decline of 210 basis points and an EBIT margin drop of 270 basis points, and it warned similar headwinds could reappear as hedges mature or roll off.
Despite the recent valuation compression, Goldman Sachs judged the share price to be consistent with a softer outlook, noting the shares trade at about 17x next twelve months price-to-earnings. The brokerage also forecast essentially flat EPS in FY27e.
For investors weighing the stock, the report underscores a combination of slower organic growth, margin erosion from raw material and energy price pressure, restricted pricing power due to reimbursement exposure, and increased competitive dynamics across key product areas. These factors informed the downgrade and the reductions in earnings and valuation assumptions.
Separately, some market services that screen stocks using algorithmic models are marketing their tools to help investors evaluate whether Coloplast fits into specific strategies, but the brokerage note itself centers on the company’s fundamentals and the cost and market dynamics described above.
Key points
- Goldman Sachs downgraded Coloplast to "sell," cut the target price to DKK 435 and raised its WACC to 8% while reducing the valuation multiple to 17x.
- The brokerage expects organic growth of about 6% in FY26-28e and has lowered EBIT forecasts, citing reinvestment needs and rising cost pressure.
- Input-cost inflation, limited pricing flexibility due to reimbursement links, and competitive and structural headwinds in key markets are principal risks to margins and growth.
Risks and uncertainties
- Input cost volatility - raw materials represent around 52% of COGS, with oil-linked inputs and chemicals rising; Goldman Sachs models roughly 100bps of gross margin contraction in FY27e.
- Market and competitive shifts - structural changes in the U.S. skin substitutes market and increased competition in Ostomy could impede the company’s ability to meet mid-term growth goals.
- Inflationary pressure in production hubs - energy and wage inflation, notably in Hungary where about 70% of production is located, raise cost risks and could affect margins if not offset by pricing or efficiency gains.