Catalysts
- Structural market tailwinds – The demand for embedded‑device software and graphical user interfaces continues to grow. Qt’s tools help companies meet the exponential growth of the embedded‑device market and the rapidly increasing speed of software‑development life cycles. As more consumer and industrial devices need intuitive UIs and as product‑development teams automate quality assurance, Qt’s cross‑platform framework becomes increasingly relevant.
- High recurring revenue and backlog visibility – Qt’s revenue base includes multi‑year developer‑licence subscriptions and distribution licences tied to customers’ production volumes. This creates forward visibility similar to an order backlog: distribution‑licence sales grew rapidly in 2023, and developer‑licence revenues have been growing steadily.
Assumptions
- Revenue Growth Outlook (per share)
- 3-year CAGR : ~6%
- 5-year CAGR : ~14%
- 7-year CAGR : ~22%,
- Forward: A 6–14% CAGR remains a reasonable assumption based on industry growth, which can be further fuled by M&A. 9% is assumed in the model, pressuming the econimic cycal will increase underlying activity.
- Net Margin Outlook
- 3-year average : ~22%
- 5–year average:~20%
- 7-year average: ~14%
- Forward : The net margins seems stable around 20-22 over the last five years. Midpoint asumed going forth - after changing to subscription model and hitting the operating leverage threshold.
Valuation considerations
QT group has historically been traiding a abnormaly high multiples which 40-55 X hence such multiples have litle predictive value. Instead a forward P/E multiple of 20 X by 2029 could be reasonable given Qt’s structural growth, recurring revenue and ESG alignment.
However, the business remains capital‑light but research‑and‑development‑intensive; returns on equity and capital are good around 30% ROE but not over the moon, so paying a premium multiple over 20 X for growth may not be justified.
To be on the lookout for
- Progress on I.A.R. Systems acquisition – Integration success and cross‑selling opportunities could materially affect revenue growth.
- Trends in distribution‑licence sales – After slowing in 2024, a rebound would signal renewed customer production and improved utilization.
- Currency and macro developments – Exchange‑rate fluctuations and macro trends (interest rates, supply‑chain conditions, trade policies) may impact revenue recognition and project timing.
- Leverage and cash position – Company could decide to drive shareholder value re-puchase or dividends given significant cash position 7.5 EUR per share vs trading price 45 EUR per share
Conclusion: stock needs to get cheaper or revenue growth needs to increase significantly to warrant a buy.
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Disclaimer
The user Mandelman holds no position in HLSE:QTCOM. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
