APAC Expansion And US Listing Will Strengthen Future Prospects

Key Takeaways

• Strategic focus on Americas and expanding software revenue may drive growth in revenue and EBITDA margins through integrated energy management solutions.
  
• U.S. listing and operational improvements in EMEA and APAC aim to enhance capital access, margins, and regional profitability.
  
• The company's financial performance is threatened by regional revenue declines, uncertain restructuring, cash flow issues, and instability from key executive departures.

Catalysts

Provides integrated energy management solutions to utility sector in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• The strategic focus on the highly profitable Americas business could lead to enhanced revenue growth and adjusted EBITDA margins, driven by stronger emphasis on integrated edge-to-enterprise energy management solutions.
  
• Increasing software revenues, which now represent 24% of total revenues, and the strategic transformation investments signal potential for higher revenue growth and improved net margins through more recurring revenue generation.
  
• The potential listing in the U.S. may increase access to a larger pool of capital and facilitate comparisons with peers, possibly leading to increased investor interest and potentially impacting earnings positively.
  
• Supply chain improvements, operational efficiencies, and regional optimization in EMEA could result in higher net margins and increased profitability in the region.
  
• Expansion in APAC with growing software and services offerings, especially in high-potential markets like Australia and India, is likely to support future revenue and earnings growth.

Landis+Gyr Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Landis+Gyr Group's revenue will grow by 7.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.0% today to 13.2% in 3 years time.
• Analysts expect earnings to reach $286.7 million (and earnings per share of $4.29) by about July 2028, up from $-85.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.9x on those 2028 earnings, up from -27.7x today. This future PE is lower than the current PE for the GB Electronic industry at 32.6x.
• Analysts expect the number of shares outstanding to decline by 0.25% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.59%, as per the Simply Wall St company report.

Landis+Gyr Group Future Earnings Per Share Growth

Risks

• The decline in the EMEA region's revenue, due to timing of large project rollouts, market softness in key areas like the U.K. and Turkey, and reduced demand for EV solutions, could negatively impact overall net revenue and profitability.
  
• The strategic review of the EMEA region, which considers options such as selling parts or all of the business, introduces uncertainty and potential restructuring costs that could affect earnings and margins.
  
• Challenges in the APAC region, such as project timing issues leading to revenue declines, might continue to strain the company's revenue generation capability.
  
• Elevated inventory levels impacting free cash flow, which was reported as negative, indicate a risk to liquidity and could affect earnings if not normalized as expected.
  
• The departure of key executives, like the Group CFO and regional heads, poses execution risk that could impact strategic initiatives and financial performance by creating instability within management.

Valuation

• The analysts have a consensus price target of CHF68.338 for Landis+Gyr Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF82.59, and the most bearish reporting a price target of just CHF51.06.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.2 billion, earnings will come to $286.7 million, and it would be trading on a PE ratio of 9.9x, assuming you use a discount rate of 5.6%.
• Given the current share price of CHF65.4, the analyst price target of CHF68.34 is 4.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.