Global Sustainable Infrastructure Will Drive Urban Transformation

Key Takeaways

• Geographic diversification through asset rotation and reinvestment reduces risk while supporting earnings growth and increased profitability.
  
• Focus on sustainable infrastructure and public-private partnerships aligns with demand trends and enables access to premium, higher-margin projects.
  
• Heavy debt burden, regional concentration, and exposure to currency and political risks threaten profitability and stability amid intensifying international competition and reliance on long-term concessions.

Catalysts

Engages in the construction and infrastructure concession services businesses worldwide.

• The significant growth and robust pipeline in recurring, long-duration concession assets-highlighted by contract wins in high-growth regions (e.g., U.S., Chile, Italy) and a record €10.8bn backlog-position Sacyr to benefit from a global surge in infrastructure investment and urbanization. This supports higher future revenue and more predictable, resilient cash flows.
  
• Emphasis on public-private partnerships (PPPs) and energy-efficient, sustainable infrastructure solutions (e.g., the major water recycling plant in Chile) align Sacyr with growing investor and government prioritization of sustainability, opening access to premium projects and potential margin expansion.
  
• The company's active rotation of mature assets and reinvestment into higher-margin or growth opportunities (e.g., Colombia divestment, redeployment in the U.S. and Europe) is improving geographic diversification and will reduce risk concentration while supporting future earnings growth and net profit.
  
• Continued progress on financial discipline, including bond refinancing at lower rates and commitment to further net debt reduction (via asset sales and higher operating cash flow), will lower financial costs and increase distributable earnings.
  
• Sacyr's strong operating cash flow conversion (EBITDA to cash >95%) and a significant, secured investment surplus, create capacity for both new capital deployment into secularly favorable markets and increased shareholder returns, improving prospects for both medium-term revenue growth and net margin resilience.

Sacyr Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Sacyr's revenue will grow by 1.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.0% today to 3.4% in 3 years time.
• Analysts expect earnings to reach €170.8 million (and earnings per share of €0.25) by about August 2028, up from €92.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €280 million in earnings, and the most bearish expecting €66 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.0x on those 2028 earnings, up from 31.2x today. This future PE is greater than the current PE for the GB Construction industry at 24.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.37%, as per the Simply Wall St company report.

Sacyr Future Earnings Per Share Growth

Risks

• Sacyr's significant exposure to exchange rate fluctuations-evidenced by a negative €213 million FX impact-underscores ongoing vulnerability to currency volatility in key Latin American markets, which may unpredictably reduce reported revenues and asset values.
  
• The company maintains a high reliance on project finance and substantial net debt (€6.891 billion at end-2024), resulting in considerable financial burden and recurring interest expenses, which could compress net margins and impede earnings growth, especially if interest rates rise again.
  
• The sustainability of Sacyr's concession-focused model depends heavily on long-duration, government-backed contracts in various jurisdictions, leaving it exposed to regulatory or political changes that could reduce recurring cash flows, disrupt project pipelines, and lower long-term profitability.
  
• Although Sacyr has ambitious international expansion plans (US, Australia, Canada, etc.), its current revenue and equity investments remain concentrated in Spain and Latin America, increasing risk from regional economic downturns or adverse political events, with potential negative effects on revenues and earnings stability.
  
• Fierce competition in core markets (such as the US and Chile) may erode Sacyr's ability to secure new contracts on favorable terms, potentially squeezing future order book growth and margins, especially as peers adapt to new technologies or bid more aggressively, impacting long-term revenue and profit expansion.

Valuation

• The analysts have a consensus price target of €4.245 for Sacyr 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 €4.95, and the most bearish reporting a price target of just €3.9.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €5.0 billion, earnings will come to €170.8 million, and it would be trading on a PE ratio of 37.0x, assuming you use a discount rate of 15.4%.
  
• Given the current share price of €3.64, the analyst price target of €4.25 is 14.3% 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.