Analysts Expect Shrinking Margins And Earnings For Asset Manager

Key Takeaways

• Continued investment in organic and inorganic growth, specifically in asset management and private markets, aims to boost revenue, targeting new regions like Africa and Asia.
  
• Shareholder-friendly policies such as dividends and buybacks highlight a strong financial position, though market conditions could affect buyback execution and earnings per share.
  
• Azimut Holding's international growth, strong financial position, and focus on private markets and shareholder returns suggest robust potential for future revenue and earnings growth.

Catalysts

Engages in the asset management business.

• Azimut Holding plans to continue investing in organic growth both in Italy and abroad, as well as in inorganic growth through M&A activities. This could drive revenue growth by expanding their asset management and private markets presence, particularly in new regions such as Africa and Asia, as noted in their future plans.
  
• The firm has achieved significant M&A activities which contributed €8.9 billion, emphasizing growth in regions like the U.S. and Australia. This positions them for increased earnings through potentially higher management and performance fees as they integrate these new assets under management.
  
• The potential spin-off and listing, or sale of the TNB banking project, is expected to unlock value. However, it may lead to a short-term increase in costs related to transaction execution and potential regulatory adjustments, impacting net margins.
  
• The firm's focus on expanding its private markets platform and achieving exits with significant returns could enhance future earnings, especially when carried interest from these funds begins contributing to the profit and loss statement.
  
• Azimut Holding's commitment to returning capital to shareholders via dividends and buybacks, along with a strong financial position, including being debt-free, points to shareholder-friendly policies that may support stock valuations. However, the execution of buybacks contingent on market conditions could also influence earnings per share positively.

Azimut Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Azimut Holding's revenue will grow by 1.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 39.2% today to 30.7% in 3 years time.
• Analysts expect earnings to reach €466.8 million (and earnings per share of €3.12) by about March 2028, down from €576.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.5x on those 2028 earnings, up from 6.5x today. This future PE is lower than the current PE for the GB Capital Markets industry at 13.5x.
• Analysts expect the number of shares outstanding to grow by 2.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.91%, as per the Simply Wall St company report.

Azimut Holding Future Earnings Per Share Growth

Risks

• Azimut Holding has consistently doubled its Assets Under Management (AUM) every five years, indicating strong growth potential which could positively impact future revenues.
  
• The company's successful international expansion into 19 countries, including substantial growth in regions like Australia and the U.S., suggests continued diversification and revenue increase.
  
• Azimut's deleveraged balance sheet, having fully repaid its debt, can lead to better net margins and increased financial stability, positioning the firm well for future profit growth.
  
• The company’s strategic focus on private markets is yielding significant returns and exits, potentially contributing positively to future earnings.
  
• Azimut has a strong cash flow and plans for shareholder returns, including dividends and buybacks, which can enhance shareholder value and stabilize or increase share prices.

Valuation

• The analysts have a consensus price target of €27.011 for Azimut Holding 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 €30.0, and the most bearish reporting a price target of just €22.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.5 billion, earnings will come to €466.8 million, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 9.9%.
• Given the current share price of €26.45, the analyst price target of €27.01 is 2.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.