SOP: Buy Rating Will Remain Supported By Modest Discount Rate Increase

Analysts have slightly reduced their price target on Sopra Steria Group, trimming it by EUR 5 to reflect a marginally higher discount rate, modestly stronger revenue growth expectations, and a nearly unchanged profit margin and future P/E outlook.

Analyst Commentary

Recent research updates reflect a nuanced view on Sopra Steria Group, with the modest reduction in the price target seen as a fine-tuning of assumptions rather than a shift in the investment thesis. The overall stance remains constructive, but with heightened attention to execution risks and valuation discipline.

Bullish Takeaways

• Bullish analysts highlight that the revised price target still implies attractive upside, suggesting that the shares remain undervalued relative to the company’s long term earnings growth potential.
• The slight reduction is largely attributed to technical factors, such as a marginally higher discount rate, rather than a deterioration in the company’s operating outlook.
• Expectations for modestly stronger revenue growth underpin the positive view that Sopra Steria can continue to gain share in key digital transformation and IT services markets.
• Stable margin and P/E assumptions indicate confidence that management can execute on its strategic plan without significant erosion of profitability.

Bearish Takeaways

• Bearish analysts view the lower price target as a signal that upside may be more constrained, particularly if market conditions remain volatile and investors demand higher risk premiums.
• The higher discount rate reflects concern about macroeconomic uncertainty and potential pressure on client IT budgets, which could slow new project wins or extensions.
• While revenue growth expectations have been nudged higher, some remain cautious that competition and pricing pressure could limit the pace at which this flows through to earnings.
• The largely unchanged margin and P/E assumptions may be seen as leaving limited room for error in execution, especially if cost inflation or wage pressures accelerate.

What's in the News

• Chief Executive Officer Cyril Malargé has informed the Board of his decision to pursue a new opportunity and step down as CEO. This has prompted a formal succession process led by the Nomination, Governance, Ethics and Corporate Responsibility Committee (Key Developments).
• The transition period will be managed by a small leadership team organised around the Group’s Chief Operating Officer to ensure operational continuity while a new CEO is selected (Key Developments).
• The Board of Directors convened on October 8, 2025, to consider and officially take note of Malargé’s planned departure as part of its scheduled board meeting agenda (Key Developments).

Valuation Changes

• Fair Value: unchanged at €201.90 per share, indicating no revision to the intrinsic value estimate.
• Discount Rate: risen slightly from 10.05 percent to 10.09 percent, reflecting a marginally higher perceived risk profile.
• Revenue Growth: increased modestly from 2.14 percent to 2.18 percent, signalling a small uplift in long term top line expectations.
• Net Profit Margin: edged down slightly from 5.82 percent to 5.81 percent, suggesting a near stable but marginally softer profitability outlook.
• Future P/E: ticked up marginally from 13.77x to 13.79x, implying a slightly higher valuation multiple on projected earnings.