Key Takeaways

Strategic international expansion and partnerships suggest potential increased revenue and earnings from high-growth markets and improved software margins.
Resolution of legal disputes and stronger cash positions support profitability, enhancing earnings stability and future cash flow.
Increasing personnel costs and legacy issue settlements may strain margins, while revenue growth faces risks from macroeconomic uncertainties and one-time collection dependencies.

Catalysts

About SNP Schneider-Neureither & Partner

Engages in the provision of software solutions for the management of digital transformation processes.What are the underlying business or industry changes driving this perspective?

The launch of Kyano and the evolution of SNP's strategy are expected to significantly extend their market category, indicating potential future revenue growth.
There is an overproportional growth in software and with partners, which suggests an increase in higher margin software revenue that could improve net margins.
The international expansion in strategic markets such as Mexico, Brazil, the Nordics, France, and the Middle East, where business has more than doubled, points to a potential future increase in revenue and earnings.
The significant improvement in the number of enabled partner consultants by 75% is a catalyst for scaling operations internationally and boosting software sales, which could lead to higher revenues and potentially improved margins.
The company’s resolution of past legal disputes and improved cash positions provide a cleaner financial slate, likely supporting future profitability and cash flow, enhancing earnings stability.

SNP Schneider-Neureither & Partner Earnings and Revenue Growth

SNP Schneider-Neureither & Partner Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SNP Schneider-Neureither & Partner's revenue will grow by 9.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.9% today to 8.4% in 3 years time.
Analysts expect earnings to reach €28.0 million (and earnings per share of €3.8) by about April 2028, up from €20.2 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 20.1x on those 2028 earnings, down from 24.0x today. This future PE is greater than the current PE for the GB IT industry at 19.1x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.52%, as per the Simply Wall St company report.

SNP Schneider-Neureither & Partner Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company indicated the need to be conservative in guidance due to macroeconomic uncertainties, which could lead to cautious revenue expectations and potential risks to revenue growth.
Personnel and operational expenses have increased significantly, with a 23% rise in personnel costs to support future growth, potentially impacting net margins if the revenue growth does not materialize as projected.
There are ongoing costs related to settling legacy issues, such as impairments from old receivables, which can negatively impact earnings and create additional financial strain.
While the company anticipates growth in the partner business, there is a risk that partners might demand higher commissions or more favorable terms, possibly impacting the company's margins in the long term.
Despite strong cash flow improvements, this year's performance was bolstered by one-time collection efforts of historical receivables, creating a risk for future earnings sustainability if such collections do not continue.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €66.5 for SNP Schneider-Neureither & Partner based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €332.1 million, earnings will come to €28.0 million, and it would be trading on a PE ratio of 20.1x, assuming you use a discount rate of 6.5%.
Given the current share price of €66.8, the analyst price target of €66.5 is 0.5% lower. 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.

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