Danish high-end consumer electronics maker Bang & Olufsen has been struggling ever since the Great Recession. It is not surprising that the stock is down from its highs in 2006–2007. However, I was indeed a bit surprised that it’s down by a staggering 98%! Even since a temporary recovery attempt that culminated in 2018, the stock has fallen by more than 90%! Over the last twelve months, though, shares are up by 46%. Management has ambitious plans to bring the struggling brand back on track. Could this be now a good entry point?
Summary and key takeaways from today’s Weekly
– Bang & Olufsen brutally fell from grace as its business has been struggling for at least two decades now.
– The stock of B&O, however, is up by almost 50% over the last twelve months, with the recent results having been decent.
– The outlook implies the stock is still cheap, but I remain cautious, as I do not buy the guidance. Watchlist.
The Bang & Olufsen (ISIN: DK0010218429, Ticker: BO) or just B&O brand is a famous Danish high-end consumer electronics maker. Many likely don’t even know the company is publicly listed on the Copenhagen Stock Exchange. Maybe because the market cap is rather tiny with 317 mn. USD / 270 mn. EUR.
Opinions are split as to B&O as a product maker.
There are people who see it as an over-priced, struggling legacy brand. Due to a focus on esthetics, the seemingly timeless look and feel of their products, paired with the desire to offer the best experience for audiophiles, B&O clearly has their fanbase.
Personally, I do not own any B&O products.
When I was searching for a pair of great active-noice-cancelling (ANC) headphones, I once tested a pair of B&O’s, but decided for a competing product with bigger ear cups, better ANC, (for my taste) less bass, but crisper mids and highs, and – yes, I am a bit old-fashioned in this regard – good-old physical buttons. I absolutely hate this touch-tipping on my ears when the headphones are on.
But back to the stock, which is the topic of this Weekly.
It is no secret the company has been struggling operationally for quite some time. But there are a few signs that offer at least a small glimmer of hope. The latest results showed some growth in the last quarter and gross margins are climbing. If the mid-term plans are achieved, the stock is likely undervalued.
The stock is up over the last twelve months, and it receives little attention, so I thought this might be worth a look.
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both as per 09 July 2025 market close – since August 2022
Back with a bang or disturbance signal?
Bang & Olufsen was founded in 1925 by Peter Bang and Svend Olufsen in Struer, Denmark. It established itself as a pioneer in luxury or high-end audio through innovative, timeless design and superior sound quality, first starting with building radios, followed by TVs and speakers, and later more mobile gadgets.
Later this year, B&O will turn 100 years!
Today, Bang & Olufsen’s assortment spans three segments – Stage (home audio like TVs and soundbars), Flexible Living (e.g. Bluetooth speakers), and On-the-Go (headphones and earphones).
The company is focusing on luxury, technology, and sustainability. Their circularity agenda focuses on circular economy principles, designing modular, repairable, and recyclable products to ensure longevity and minimize waste. It resulted in so-called Cradle-to-Cradle certifications for eight products.
The company has experienced highs, such as global recognition for its timeless craftsmanship, and lows, including financial challenges and market competition, first in the 1990s and especially following the 2008 economic collapse. Especially from the latter, B&O never really recovered again, necessitating strategic pivots to maintain market relevance.
For example, B&O sold its highly-profitable automotive audio business to Harman International Industries in May 2015 (see here), a consistent growth driver with increasing car model partnerships and take-rates, and responsible for around 20% of sales at that time. It was a key part of B&O’s B2B segment, outperforming the struggling consumer segment during the early 2010s.
From an older annual report, here the FY 2015/2016 version (see here), we can see how he business was deteriorating. Sales and gross margins went down, earnings were negative, cash flow dried up and the company raised equity to improve the previously indebted balance sheet.
B&O also increased out-licensing activities for its technology and know-how. In 2015, HP Inc. became a premium audio partner for computers and devices (see here). In 2016 (see here), LG partnered with B&O for mobile device audio. Recently, a significant 6-year licensing deal with TCL for premium TV audio was secured (see here).
If you want to get to know a bit more about B&O’s history and their struggles, I recommend the article below.
The bottom line is, B&O has been coping with increased competition, changing consumer tastes and also a shift towards enjoying music more on the go.
This area is where competition is brutal and even more intense than in the at-home segment, facing brands like Apple (including Beats), Bowers and Wilkins, Bose, Sennheiser, Marshall, Sonos, JBL, and Sony – just to name a few.
At first glance, this might sound like a major headwind.
However, B&O differentiates itself through luxury positioning and timeless Scandinavian design, targeting a niche high-end market rather than mass-market scale where many of the mentioned-above brands fall into. B&O’s focus on premium, high-margin products (e.g., H100 headphones with premium materials like lambskin leather) targets a luxury niche, limiting direct price competition.
Although it reduces direct competition in their core segment, the other part of the truth is that it also limits broader market share and scale.
At the latest at this point we know that B&O is playing in the upper-market segment. Accordingly, the expectation should be that the business is throwing off cash like crazy.
Gross margins are strong and have reached a record level even, indicating strong cost control and resilience against the competition.
Sales have not seen any growth over the last ten years, though, and are currently the lowest during this period with the exception of the one-off dip in 2020.
I have a very mixed perspective on such sales trends.
Unfortunately, there’s a big gap to what follows gross margins.
B&O has very low operating margins. Free cash flow looks better, but is not ultra-high for a luxury company. And it has been fluctuating wildly over the years, indicating there might have been bigger working capital movements.
The chart above shows the last ten years, with the latest fiscal year having just closed per 31 May 2025. Operating margins were never high, only coming in at low-single digits.
Free cash flow looks clearly better. The difference is explained by B&O having big depreciation (physical assets) and amortization (intangible assets) charges which are added back from profits to cash flows as they are non-cash positions.
That’s why I wouldn’t focus too much on operating profit margins.
Operating cash flow, with some exceptions, is solidly positive.
The recent results, announced on 3 July 2025 (see here), were mixed.
There were some negatives like stagnant sales growth year over year, but also positives with the last quarter having been much stronger and more dynamic with 4% higher sales, and gross margins reaching a new high.
However, B&O is not able to turn that into strong results below that, especially free cash flow. The next chart shows that FCF during the year is fluctuating strongly.
But there’s a reason for that.
The main explanation for the significantly lower FCF is that B&O is heavily ramping up new product and platform developments.
The graphic in the middle of the above chart shows Capex is on the rise. On the last graphic, it is shown that “capital resources” have grown strongly to now 600 mn. DKK. Indeed, 525 mn. DKK are cash with debt being insignificant, resulting in a robust net cash position. The rest is an available credit line.
However, B&O raised 217 mn. DKK in new equity during the last year. Good, as it brought in more liquidity and de-risks the case. But at the cost of dilution for shareholders.
Speaking of dilution, share count has more than tripled over the last decade.
Mainly as a result of the tough years 2020 and 2021, at least as shown in the chart below. From the annual report 2009/2010 (p. 19, see here), we can see that share count was 24 mn. shares in the fiscal year 2005/2006. It went up by 50% with the Great Recession and since then is up by a factor of another 4x.
The hefty dilution makes looking at the former highs a useless exercise.
Regarding former highs, here is the stock chart of B&O.
I haven’t shown it until here as it signals on one side a dying company and on the other doesn’t take dilution into account.
That’s why a look at the entire market cap is important.
B&O in 2018 was close to reaching its former high. Now, it is trading more on the lower side, with long-time shareholders having suffered significant losses due to the dilutions in between.
But we will return to the valuation later.
Despite the promising sales development, management during the earnings call reported a general decline in store footfall in Europe and North America, suggesting cautious consumer sentiment.
Even though basket sizes were higher and conversion rates indicated their luxury clientele remains engaged, this suggests some caution is warranted. A clear positive is the outstanding 29% growth rate in B&O’s On-the-go segment we briefly discussed above. B&O seems capable of being a strong competitor in this niche.
The other two segments were modestly up by 2%, respectively down by 2%.
The bad news is, On-the-go is generating only 29% of own product sales and 25% of total sales (when factoring in revenues from out-licensed activities). This segment clearly has potential, and I do not want to make it smaller than it truly is. But the danger lies in the other segments shrinking.
Also, the co-branded (out-licensed) activities were weak during the quarter, shrinking by 21%. For the full year, sales in this area fell by 10%, as disclosed in their annual report (see here, p. 22).
Until here a mixed bag.
The outlook is mixed, too. Due to tariff and consumer sentiment uncertainties, management is guiding for a broad range of +1% to +8% sales growth. It is a big difference, whether growth will be on the low- or high-end.
Operating margins and even FCF will likely be negative, mainly as a result of the big investment phase.
On the same slide, B&O shows their mid-term targets, reaching into 2027/2028, i.e. spanning over the next three fiscal years.
I zoomed in:
Starting from today, B&O guides to grow sales 8% per annum (!), to reach an operating margin of 8% (bsi = before special items), and FCF of 250 mn. DKK at the end of this period. This is a very ambitious outlook for my taste.
To put things into persecutive, 8% CAGR is a total growth rate of almost 26%.
They are not sure what the growth rate will be this year, but guide for 8% CAGR over the next three years. Assuming they grow only 1% this year, i.e. on the low-end of the guidance – will we then suddenly see two years of double-digit sales growth? For a business that seemingly has been struggling for at least 20 years?
Management must be very confident that their new products will be major hits.
In the same token, an operating margin of 8% sounds lofty, too. Even after the investment phase subsides, depreciation and amortization will remain high or even be higher as a result of higher Capex now. I have difficulties in explaining this through cost cutting and achieving economies of scale only. I am ruling massive price hikes either to be a viable solution.
FCF of 250 mn. DKK sounds ambitious, too. The latest operating cash flow figure before investments was roughly 250 mn. DKK – supported by favorable working capital shifts. I cannot imagine Capex to come down that much. It was guided to increase to more than 300 mn. DKK in the short-term, and it was above 200 mn. DKK over the last years each fiscal year.
I seriously don’t know where the growth suddenly should come from.
The stock trades at 14 DKK (~1.88 EUR). The three-year high is around 16 DKK or 15% above the current level. The low was at 8 DKK where the stock turned to the upside several times. The momentum is currently clearly to the upside. Yesterday alone, without any apparent reason, the stock shot up by 5%.
With a market cap of 2 bn. DKK (~270 mn. EUR), and targeted free cash flow of 250 mn. DKK in three years, despite the recent rise, this would still be an attractive valuation, in light of the (necessary!) high growth dynamic and improving business momentum. The EV / FCF would be only 8x, implying shrinkage, not growth.
(I am ignoring the net cash position as they want to ramp up Capex with free cash flow likely being negative for now).
But my bottom line is, as tempting as it might sound, I am skeptical about the extremely optimistic outlook. B&O in the past has often seen big rises and cyclical upswings, only to cut guidance massively, even multiple times in a fiscal year. The valuation is not in no-brainer territory, but built on airy figures.
The price-to-sales bottom in the past was between 0.2–0.4x. Currently, B&O trades at 0.8x – still far the highs, but almost in the mid-section of the historical range.
I’ll put it on my watchlist.
Conclusion
Bang & Olufsen brutally fell from grace as its business has been struggling for at least two decades now.
The stock of B&O, however, is up by almost 50% over the last twelve months, with the recent results having been decent.
The outlook implies the stock is still cheap, but I remain cautious, as I do not buy the guidance. Watchlist.
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