Focus On Data Capabilities And Acquisitions Will Position For Future Market Leadership

Key Takeaways

• Strong revenue growth is driven by subscription products and strategic acquisitions, enhancing data capabilities and product offerings to maintain market leadership.
  
• Interconnectivity strategy and efficiency gains improve EBITDA margins, with transaction enablement business accelerating in key areas like data and CRM software.
  
• Regulatory changes, reliance on external services, and competitive pressures could impact Scout24's revenue growth and net margins without proportional gains in the real estate market.

Catalysts

Operates ImmoScout24, a digital platform for the residential and commercial real estate sectors in Germany and internationally.

• Scout24 has shown strong revenue growth from its B2B and B2C subscription products, with a continuous expansion of its customer base, which is expected to drive further revenue growth in the coming years.
  
• The company's transaction enablement business is seeing significant acceleration, particularly in data and valuation, CRM software, and ESG product lines, indicating potential for increased revenue and earnings.
  
• The strategic implementation of an interconnectivity strategy has led to impressive ordinary operating EBITDA margin expansion, anticipated to continue with further efficiency gains and cost management, positively impacting net margins.
  
• Scout24's focus on enhancing its data capabilities and product offerings through acquisitions and innovations, such as the proprietary Scout24 German Transaction Index, positions it well for future revenue growth and market leadership.
  
• The favorable market environment, including the recovery of demand for transactions and potential declines in interest rates, is expected to support growth in revenue from both B2B and B2C channels.

Scout24 Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Scout24's revenue will grow by 8.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 27.5% today to 37.1% in 3 years time.
• Analysts expect earnings to reach €279.0 million (and earnings per share of €3.95) by about March 2028, up from €162.1 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 28.1x on those 2028 earnings, down from 41.4x today. This future PE is lower than the current PE for the GB Interactive Media and Services industry at 39.0x.
• Analysts expect the number of shares outstanding to decline by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.73%, as per the Simply Wall St company report.

Scout24 Future Earnings Per Share Growth

Risks

• The muted demand for mortgage leads, despite a recovering trend in seller leads, could negatively affect revenue in the transaction enablement business if the mortgage market does not rebound as anticipated.
  
• Continued market challenges for customers involved in commercial development and new homebuilding sectors may slow down revenue growth if these segments do not recover as expected, impacting the overall earnings.
  
• Regulatory changes in Germany, while currently perceived positively, could result in unfavorable adjustments if the framework for real estate transactions does not align with Scout24's business model, potentially affecting future revenue and net margins.
  
• The increase in personnel costs and reliance on external service providers, as noted in the operating expenses, could pressure net margins if such costs are not countered by proportional revenue growth.
  
• Competitive dynamics, such as possible moves by competitors like Immowelt and Kleinanzeigen, could increase pricing pressure or customer acquisition costs, impacting revenue and market share if Scout24 cannot maintain its competitive edge.

Valuation

• The analysts have a consensus price target of €93.529 for Scout24 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 €110.0, and the most bearish reporting a price target of just €75.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €752.2 million, earnings will come to €279.0 million, and it would be trading on a PE ratio of 28.1x, assuming you use a discount rate of 5.7%.
  
• Given the current share price of €92.75, the analyst price target of €93.53 is 0.8% 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.