Key Takeaways
- Morningstar considers Saab undervalued with its stock trading at a 19% discount.
- The defense contractor is benefiting from rising defense budgets across Europe and growing demand for weapons, radar systems and military surveillance equipment.
- Despite strong long-term growth prospects, investors face risks related to contract execution and production ramp-ups.
Saab SAAB B shares have been one of the biggest winners in the Morningstar Sweden Index in recent years, as rising geopolitical tensions and higher defense spending across Europe transformed investor sentiment toward defense companies.
Yet after soaring more than 226% over the past three years, Saab stock has lost momentum. The shares are down around 24% over the past three months and have fallen 9% since the start of the year.
Why Has Saab’s Share Price Fallen?
According to Morningstar equity analyst Loredana Muharremi, the latest pullback reflects a shift in investor focus rather than a deterioration in the company’s long-term outlook.
“The recent weakness is primarily a function of valuation, as investors have started to assign greater execution risk to a sector that had previously been priced for near-perfect delivery,” Muharremi says.
“The debate has shifted from whether demand will materialize to how efficiently companies can convert that demand into revenue, margins and cash flow,” she adds.
Key Morningstar Metrics for Saab Stock
- Fair Value Estimate: SEK 610.00
- Morningstar Rating: ★★★★
- Economic Moat: Wide
- Morningstar Uncertainty Rating: Medium
- Discount to Fair Value: 19%
Saab’s Challenge: How to Manage Growth
Muharremi recently raised the fair value estimate for Saab, citing greater confidence in the company’s ability to ramp up production and execute on its growing order backlog.
At the same time, she believes the biggest challenge facing Saab over the next several years is managing that growth effectively.
“The biggest execution risk is managing the industrial scaleup required to deliver on a rapidly growing backlog,” she says.
“Demand is unlikely to be the constraint; the challenge is expanding production capacity, securing critical components, integrating new suppliers and hiring skilled labor while maintaining delivery schedules and profitability.”
As Saab expands across multiple business areas simultaneously, successful execution will become increasingly important in determining whether the company can convert strong demand into maintainable earnings growth.
Future Fighter Aircraft Orders Offer Additional Upside
One area where Muharremi sees particularly significant upside is Saab’s Gripen fighter aircraft program.
“Ukraine has already taken concrete steps toward becoming a Gripen operator, but the ultimate fleet size remains uncertain and could be substantially larger than the initial acquisition,” she says.
The opportunity extends well beyond the sale of aircraft as every new Gripen customer creates decades of recurring revenue through maintenance, upgrades, training and weapons integration.
She also sees further uplift from Thailand’s 2025 purchase of four Gripen aircraft and from changes in Europe’s future combat-aircraft landscape. “As one of the few European companies with an active fighter aircraft program, Saab could become an increasingly relevant partner in future European combat-air initiatives,” Muharremi says.
Is Saab Stock a Buy?
Morningstar assigns Saab a fair value estimate of SEK 610 per share, implying the stock currently trades at a 19% discount and earns a 4-star rating. The valuation reflects expectations that Saab will benefit from a multiyear increase in defense spending while improving profitability as more programs move from development into full-scale production.
Overall, Muharremi sees Saab as strongly positioned for the rapid expansion of European air and missile defense, as recent conflicts have highlighted the importance of integrated defensive architectures combining sensors, radars, command-and-control systems and interceptors.
“Saab already has meaningful positions across several parts of this ecosystem and could benefit as European nations accelerate investments aimed at protecting critical infrastructure, military assets and population centers,” she says.
