Last Update30 Jul 25Fair value Increased 37%
Despite a downward revision in revenue growth forecasts and a higher future P/E multiple, the consensus analyst price target for tinyBuild has notably increased from £0.07 to £0.096.
Valuation Changes
Summary of Valuation Changes for tinyBuild
- The Consensus Analyst Price Target has significantly risen from £0.07 to £0.096.
- The Consensus Revenue Growth forecasts for tinyBuild has significantly fallen from 7.2% per annum to 5.5% per annum.
- The Future P/E for tinyBuild has significantly risen from 45.95x to 52.93x.
Key Takeaways
- Focus on cash generation and high-potential games enhances cost management and strengthens the game pipeline, boosting future revenue and earnings.
- Diversified revenue through own IP development and multimedia expansions supports stable growth and improved margins.
- Heavy reliance on the back catalog and decreased revenues highlights potential risks in sustaining revenue streams and impacts growth, profitability, and future earnings potential.
Catalysts
About tinyBuild- Engages in the development and publishing of video games worldwide.
- tinyBuild focuses on cash generation while investing in high-potential games and using data-driven approaches to allocate capital, leading to strong cost management and a robust game pipeline, which could improve future revenue and earnings.
- tinyBuild's diversification of revenue streams through increased own IP development across multiple platforms can lead to higher margins and more stable earnings growth, as 77% of gaming revenues are from their own IP.
- Launching new games, particularly those with a high number of wishlists on Steam, such as Kingmakers, combined with a focus on multimedia expansions like movies and series, can significantly drive top-line growth and market presence.
- Cost reduction strategies, demonstrated by moving from a $7.1 million EBITDA loss to a $3.7 million loss, indicate an improvement in net margins, which should further benefit from higher-margin own IP game releases.
- Expansion into new platforms (like Nintendo Switch) and ports of successful games to consoles can enhance revenue streams and increase market share.
tinyBuild Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming tinyBuild's revenue will grow by 7.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from -59.1% today to 2.3% in 3 years time.
- Analysts expect earnings to reach $1.0 million (and earnings per share of $-0.01) by about May 2028, up from $-20.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $3 million in earnings, and the most bearish expecting $-1 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 46.0x on those 2028 earnings, up from -1.3x today. This future PE is greater than the current PE for the GB Entertainment industry at 13.5x.
- 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 7.74%, as per the Simply Wall St company report.
tinyBuild Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company's net game revenues decreased by over 20%, mainly due to a drop in back catalog revenues, indicating potential issues in sustaining revenue streams from existing games. This could impact overall revenue and earnings.
- Despite improving adjusted EBITDA through cost-cutting, continued lower revenues and reduction in software development investments suggest potential constraints in growth and new product development, which might affect future earnings potential.
- Cash flow from operations declined significantly, driven by lower revenues, which could impact the company's ability to invest in new game development and maintain financial flexibility, ultimately affecting net margins.
- The heavy reliance on the back catalog, comprising 87% of revenues, poses a risk if existing titles fail to generate sustained interest, potentially affecting long-term revenue stability and earnings.
- Impairment costs related to underperforming games point to potential risks in game development investments, impacting overall profitability and net margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of £0.07 for tinyBuild 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 £0.1, and the most bearish reporting a price target of just £0.04.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $42.8 million, earnings will come to $1.0 million, and it would be trading on a PE ratio of 46.0x, assuming you use a discount rate of 7.7%.
- Given the current share price of £0.05, the analyst price target of £0.07 is 28.6% 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.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) 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 price targets and estimates used are consensus data, and do 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 AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.