Key Takeaways
- Significant equity trading growth driven by IPOs may boost future revenue and market activity.
- Cost optimization and strategic focus on ETFs and infrastructure aim to enhance efficiencies and trading revenue growth.
- Increased employee and IT costs, platform delays, reliance on large IPOs, and operational challenges could pressure profit margins and threaten overall revenue growth.
Catalysts
About Gielda Papierów Wartosciowych w Warszawie- Operates a stock exchange in Poland.
- The Warsaw Stock Exchange has seen a significant growth in equity trading turnover, with notable increases from IPOs such as the ZabKa Group, which could catalyze further IPO activity and enhance equity market turnover, driving future revenue growth.
- The robust increase in gas and electricity turnover volumes, particularly due to improvements in the domestic energy production sector, suggests potential for continued growth in commodity market revenues even as the electricity trading segment faces stabilization.
- The cost optimization program has successfully lowered the cost/income ratio and is expected to further improve operational efficiencies, potentially leading to higher net margins as expense growth remains below revenue growth.
- The promotion and recent strategic focus on ETFs, potentially coupled with a fee reduction program into 2025, aim to drive increased trading volumes and investor participation in these instruments, which can enhance trading revenue from diverse investment products.
- Expected increases in capital expenditure, particularly towards the development of the new trading system (Watts), coupled with efforts to enhance IT infrastructures, are aimed at improving operational efficiencies and infrastructure capabilities, potentially supporting future growth in earnings.
Gielda Papierów Wartosciowych w Warszawie Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Gielda Papierów Wartosciowych w Warszawie's revenue will grow by 4.9% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 32.0% today to 31.6% in 3 years time.
- Analysts expect earnings to reach PLN 169.5 million (and earnings per share of PLN 4.4) by about April 2028, up from PLN 148.7 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 15.9x on those 2028 earnings, up from 13.0x today. This future PE is lower than the current PE for the GB Capital Markets industry at 22.1x.
- 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 9.72%, as per the Simply Wall St company report.
Gielda Papierów Wartosciowych w Warszawie Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- A significant increase in employee costs and IT expenses, driven by salary raises and IT infrastructure investment, could pressure profit margins and affect net profitability.
- The delay and budget overshoot in the development of the Watts trading platform could result in increased capital expenditure requirements, potentially impacting net earnings and cash flow.
- Dependency on significant IPOs like ZabKa, which if faced by adverse market conditions or underperformance, could negatively influence turnover growth and subsequently revenue.
- While there was revenue growth in the financial markets, the commodity market revenue was flat, indicating a potential risk to overall revenue growth if commodity markets do not pick up.
- The necessity of ongoing cost optimizations and management board changes indicate operational challenges, which could risk operational efficiency and net margins if not effectively managed.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of PLN49.832 for Gielda Papierów Wartosciowych w Warszawie 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 PLN56.5, and the most bearish reporting a price target of just PLN45.6.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN536.0 million, earnings will come to PLN169.5 million, and it would be trading on a PE ratio of 15.9x, assuming you use a discount rate of 9.7%.
- Given the current share price of PLN46.18, the analyst price target of PLN49.83 is 7.3% 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.
How well do narratives help inform your perspective?
Disclaimer
Warren A.I. 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 Warren A.I. 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 Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.