ASX:CDA Strong Growth Outlook Driven by Increasing Market Demand Despite Regulatory Challenges

by Ella Walker

Analyst

8 January 2026

Fund managers highlight Codan Ltd's robust growth driven by defense needs and strong gold prices, noting risks tied to market valuations and demand fluctuations.

Key Takeaway

In short, fund managers exhibit a cautious sentiment toward Codan Ltd, reflecting recent volatility and price performance. A key takeaway is the anticipated growth in defense-related revenue driven by military demand, while a significant risk remains the sensitivity of the metal detection segment to fluctuations in gold prices.

Codan Ltd: Recent Developments and Investment Outlook

Performance Overview and Key Metrics

As of January 2026, Codan Ltd (ASX:CDA) has witnessed significant fluctuations in its share price, recently trading at approximately $31.56 after peaking at $36. This movement is reflective of broader trends observed among defense and technology firms. The company's earnings have consistently outperformed market expectations, with a notable recovery in its metal detection business correlating strongly with rising gold prices, which have surged by 65% over the past year.

Investment Sentiment Among Fund Managers

Various fund managers, including Montgomery Investment Management and Pendal Group, have recently expressed a cautious yet optimistic outlook on Codan. As highlighted during Codan's recent Annual General Meeting (AGM), the robust demand for communications technology, particularly within defense sectors, remains a significant growth driver. Fund managers have noted a 25% compound annual growth rate (CAGR) anticipated in earnings per share, underscoring an optimistic long-term perspective despite short-term volatility.

Sector Performance and Strategic Positioning

In June 2025, Pendal Group categorized Codan as an overweight position, attributing its outperformance to increasing military spending in Europe. The strategic positioning within defense applications has allowed Codan to capitalize on various opportunities, leading to a 19% year-on-year growth in its communications segment. This diversification, alongside addressable markets in metal detection, indicates a sound operational leverage that benefits from global trends.

Market Catalysts and Risks Ahead

As a provider of niche communication technologies, Codan's market presence in both defense and gold detection sectors serves as dual leverage points. However, investors remain cognizant of potential downturns, particularly in gold-related sales that may be tied to fluctuations in commodity prices. Fund managers from Atlas Funds Management have cautioned against the inherent risks, suggesting that the price-to-earnings ratio of 45 may limit margin safety, especially in an inflationary environment.

Conclusion and Future Considerations

The recent commentary from prominent fund managers indicates a strong belief in Codan's long-term potential, driven by the company's ability to adapt and innovate within its core markets. Continuous monitoring of market trends and operational performance will be essential for investors looking to maximize returns. For comprehensive insights and ongoing analysis, stakeholders are encouraged to visit Codan Ltd's profile.