European Urbanization And Sustainable Demand Will Fuel Future Success

Key Takeaways

• Structural demand tailwinds, sustainability trends, and technology investment support recurring revenue growth and margin expansion.
  
• Margin improvement and profitability gains are expected from operational streamlining, strategic M&A, and focus on higher-value contracts.
  
• Persistent weak demand, heavy reliance on acquisitions, climate impacts, rising leverage, and delayed profitability improvements threaten revenue stability and earnings predictability.

Catalysts

Engages in the green space management and landscaping business in Sweden, Norway, and rest of Europe.

• The increasing urbanization and population growth across Europe, coupled with a stable and large addressable market for outdoor services, position Green Landscaping Group to benefit from a long-term structural demand uptrend; this supports future organic and acquired revenue growth.
  
• Growing societal and regulatory demands for sustainable, climate-adaptive urban spaces align directly with the company's established expertise and service offerings, potentially increasing contract flow and supporting higher recurring revenues.
  
• Ongoing margin expansion activities in Sweden-focused on discontinuing unprofitable contracts and operational streamlining-are expected to deliver visible improvements in profit margins as these effects come fully into play during late 2025 and into 2026; this should lift group-level EBITDA margins and net earnings.
  
• Continued execution of the M&A strategy, particularly through acquiring larger and more profitable companies with stronger internal structures, is set to accelerate acquired EBITA, drive geographic diversification, and improve overall group profit margins.
  
• Investment in proprietary digital platforms and operational automation is expected to unlock further productivity gains, reduce cost intensity, and support net margin and earnings expansion as technology adoption advances across the business.

Green Landscaping Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Green Landscaping Group's revenue will grow by 6.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.6% today to 5.8% in 3 years time.
• Analysts expect earnings to reach SEK 435.5 million (and earnings per share of SEK 6.32) by about August 2028, up from SEK 161.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.5x on those 2028 earnings, down from 20.2x today. This future PE is lower than the current PE for the SE Commercial Services industry at 19.6x.
• Analysts expect the number of shares outstanding to grow by 1.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.24%, as per the Simply Wall St company report.

Green Landscaping Group Future Earnings Per Share Growth

Risks

• Persistent market headwinds, as described by management (market is trending sideways and headwinds in the marketplace), combined with negative organic growth (-7% for the rolling 12 months and -9% in Q2), raise concerns that underlying demand for core services could remain muted for an extended period, negatively impacting long-term revenue growth.
  
• Dependence on weather conditions-specifically, lack of winter and snow removal work-has severely impacted results in Sweden and Norway, leading to both lower revenues and deterioration in net profit margins (e.g., EBITA margin in Sweden declining from prior periods); ongoing climate unpredictability due to global warming could further erode top-line performance and margin stability over time.
  
• The business's strategy remains heavily M&A-driven; while recent acquisitions have generally met expectations, sustained reliance on acquisitions to support growth amid weak organic trends elevates integration risk and the potential for disruption or one-off costs, threatening stable year-over-year earnings and exposing the company to potential overextension and increased financial leverage.
  
• Financial leverage has increased to 2.9x, slightly above management's stated target, and flat or declining operating cash flow (e.g., Q2 operating cash flow negative SEK 78 million vs. SEK 11 million prior year) adds pressure on liquidity and repayments, potentially constraining future investment capacity or risking higher refinancing costs, which could compress net margins or dilute earnings.
  
• The company's explicit focus on margin expansion through discontinuation of unprofitable contracts and operations (especially highlighted in Sweden) reflects underlying profitability challenges; however, delayed timing in full realization of these improvements (expected gradually through H2 and mainly in 2026) highlights near
• to medium-term margin volatility risk, leading to unpredictable earnings and casting doubt on short
• to mid-term profitability stabilization.

Valuation

• The analysts have a consensus price target of SEK84.833 for Green Landscaping Group 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 SEK90.0, and the most bearish reporting a price target of just SEK75.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK7.5 billion, earnings will come to SEK435.5 million, and it would be trading on a PE ratio of 13.5x, assuming you use a discount rate of 6.2%.
• Given the current share price of SEK57.5, the analyst price target of SEK84.83 is 32.2% 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.