Expanding Stores And Focusing On High-Demand Products Will Position The Company For Future Success

Key Takeaways

• Investment in smart home and energy-efficient products aligns with high-demand sectors, potentially increasing revenue and net margins.
  
• Geographical expansion in Norway and Sweden, along with strategic cost savings, is expected to drive revenue growth and profitability.
  
• Declines in sales and reliance on specific product segments expose Elektroimportøren to risks in revenue growth due to market volatility and external factors.

Catalysts

Sells electrical installation products to private and professional customers in Norway.

• The expansion of physical stores in Norway, with plans to open up to 10 more stores, is expected to drive revenue growth by increasing the company's market presence and accessibility.
  
• Continued investment in smart home and energy-efficient products positions the company to capitalize on increasing demand in these high-growth sectors, potentially boosting revenue and contributing to higher net margins.
  
• The company's strategic focus on improving gross margins through better category management and margin improvements in Sweden can positively impact earnings by increasing profitability.
  
• Integration of SpotOn into core operations and associated cost savings are expected to reduce operating expenses, enhancing EBITDA and net profit margins over time.
  
• Geographical expansion and further development in the Swedish market, where the company has already seen nearly 20% sales growth, present significant opportunities for top-line revenue growth and brand recognition.

Elektroimportøren Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Elektroimportøren's revenue will grow by 8.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.6% today to 4.4% in 3 years time.
• Analysts expect earnings to reach NOK 93.5 million (and earnings per share of NOK 1.84) by about May 2028, up from NOK 41.6 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 11.7x on those 2028 earnings, down from 14.2x today. This future PE is lower than the current PE for the NO Specialty Retail industry at 14.8x.
• 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 9.89%, as per the Simply Wall St company report.

Elektroimportøren Future Earnings Per Share Growth

Risks

• The decrease in like-for-like sales in Norway, down by 1.8% for the full year, could indicate potential challenges in maintaining revenue growth domestically.
  
• The failure to find a partner for SpotOn and resulting cost reductions may impact overall operational efficiency and future revenue opportunities.
  
• The drop in solar orders and invoiced solar projects hints at volatility or potential contraction in this segment, potentially affecting future revenues from these projects.
  
• The slower January sales due to weather conditions suggest that external factors could unpredictably impact sales performance and revenue consistency.
  
• The reliance on smart home and energy-efficient products for future growth could present risks if consumer interest or adoption rates are lower than expected, potentially impacting future revenue growth.

Valuation

• The analysts have a consensus price target of NOK16.5 for Elektroimportøren based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK2.1 billion, earnings will come to NOK93.5 million, and it would be trading on a PE ratio of 11.7x, assuming you use a discount rate of 9.9%.
• Given the current share price of NOK11.6, the analyst price target of NOK16.5 is 29.7% 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.