ReSound Nexia And Vivia Will Strengthen Future Market Position

Key Takeaways

• Successful transformations and synergy realizations have increased GN Store Nord's profitability, with earnings and margin expansion expected to continue positively impacting future growth.
  
• Strong product innovation across divisions is driving revenue growth and market share gains, especially in Hearing, Enterprise, and Gaming sectors, bolstering overall financial performance.
  
• Mixed market conditions, geopolitical challenges, and currency fluctuations may jeopardize revenue growth, margins, and profitability across GN Store Nord's sectors.

Catalysts

Provides hearing, audio, video, and gaming solutions in Denmark, rest of Europe, North America, and internationally.

• GN Store Nord has undergone a successful transformation into a more efficient company, resulting in profitable growth and increased margins through synergy realizations, which are anticipated to continue to positively impact earnings and margin expansion in future years.
  
• The Hearing division demonstrated strong performance with 10% organic growth driven by successful product launches such as ReSound Nexia and the upcoming ReSound Vivia, expected to boost market share and revenue growth.
  
• The Enterprise division maintains a market-leading position with opportunities for market improvements in 2025, driven by new product innovations such as video bars and headsets, potentially impacting both revenue and margin.
  
• The Gaming division, led by SteelSeries, expects further market share gains and margin improvements as it benefits from a growing gaming market and operational synergies, which will positively influence revenue and earnings.
  
• Continued investments in flexible and resilient global supply chains, coupled with technology innovation and synergies from the One-GN initiative, are expected to enhance operational efficiency and drive sustainable growth, impacting free cash flow and margin progression.

GN Store Nord Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GN Store Nord's revenue will grow by 4.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.5% today to 9.4% in 3 years time.
• Analysts expect earnings to reach DKK 1.9 billion (and earnings per share of DKK 12.35) by about May 2028, up from DKK 988.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting DKK2.2 billion in earnings, and the most bearish expecting DKK1.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.4x on those 2028 earnings, up from 14.5x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 14.7x.
• 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 8.35%, as per the Simply Wall St company report.

GN Store Nord Future Earnings Per Share Growth

Risks

• Mixed market conditions and slower-than-expected growth in the Enterprise division, resulting in negative 3% organic growth, could pose a risk to expected revenue growth.
  
• The negative impact of 0.5 percentage points from U.S.-China tariffs on margins in the Gaming and Enterprise divisions, along with potential geopolitical challenges, may impact net margins.
  
• Fluctuations in foreign exchange rates, particularly the appreciation of the U.S. dollar, pose a risk to reported EBITA margin, affecting overall earnings.
  
• Reduced revenue from the consumer wind-down, affecting the overall organic growth rate of the company, may impact revenue projections.
  
• Competitive dynamics in the Hearing and Enterprise markets, and potential challenges in executing market share gains, could affect future revenue and profitability.

Valuation

• The analysts have a consensus price target of DKK169.588 for GN Store Nord 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 DKK270.0, and the most bearish reporting a price target of just DKK90.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK20.4 billion, earnings will come to DKK1.9 billion, and it would be trading on a PE ratio of 16.4x, assuming you use a discount rate of 8.4%.
• Given the current share price of DKK98.58, the analyst price target of DKK169.59 is 41.9% 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.