Expansion Into Environment, Energy, And Infrastructure Will Drive Future Market Opportunities

Key Takeaways

• Share buybacks at undervaluated levels are expected to increase earnings per share and enhance value for shareholders.
  
• Strategic focus on high-growth sectors and private debt investments could boost revenue growth and improve net margins and asset returns.
  
• High liquidity acts as a drag on performance, with market challenges, portfolio concentration risks, and conservative valuations impacting earnings and net asset value growth.

Catalysts

A private equity and venture capital firm specializing in direct and fund of fund investments.

• The company is actively engaging in share buybacks at current undervaluated levels, which is expected to be accretive and increase earnings per share (EPS).
  
• Their strategic focus on the environment, energy, and infrastructure sectors, identified as growth areas, could drive future revenue growth and expand market opportunities.
  
• The increased deal flow and expectation to deploy excess liquidity into high-yield private debt investments could enhance overall net margins and return on assets.
  
• Plans to fully invest Fund VIII by the end of next year might boost future revenue and provide avenues for higher earnings through increased investment activity.
  
• Streamlined operations and valuation approaches have improved value realization and cash generation, which could stabilize or enhance net asset value (NAV) and support long-term revenue growth.

Deutsche Beteiligungs Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Deutsche Beteiligungs's revenue will grow by 26.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 43.7% today to 60.1% in 3 years time.
• Analysts expect earnings to reach €131.8 million (and earnings per share of €7.15) by about February 2028, up from €47.5 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 6.3x on those 2028 earnings, down from 9.4x today. This future PE is lower than the current PE for the GB Capital Markets industry at 18.9x.
• Analysts expect the number of shares outstanding to decline by 2.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.18%, as per the Simply Wall St company report.

Deutsche Beteiligungs Future Earnings Per Share Growth

Risks

• The company is experiencing a high liquidity cushion, which is considered a drag on performance due to interest rates and can affect earnings negatively if not deployed effectively.
  
• The market environment presents a tug of war between buyers and sellers, with soft current trading and diverging price expectations, potentially impacting revenue and margins.
  
• There is a notable concentration in the portfolio, which poses risks; some portfolio companies are conservatively valued and may not show immediate improvement, impacting net asset value stability.
  
• The company's earnings from the portfolio have been negative, affected by the change in debt and investment exposure, which could negatively influence future earnings.
  
• Multiples have not been as beneficial this year, dampening earnings, and a cautious stance on future guidance hints at potential challenges, which could affect net asset value growth and overall financial performance.

Valuation

• The analysts have a consensus price target of €43.233 for Deutsche Beteiligungs 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 €48.0, and the most bearish reporting a price target of just €36.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €219.3 million, earnings will come to €131.8 million, and it would be trading on a PE ratio of 6.3x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of €24.8, the analyst price target of €43.23 is 42.6% higher.
  
• 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.