Urbanization And Digital Security Will Unlock Future Opportunities

Key Takeaways

• Shifting focus to technology-driven, higher-margin contracts and advanced security services is expected to boost revenue growth, margins, and profitability.
  
• Streamlining operations, closing low-margin contracts, and ongoing cost-cutting initiatives are improving cash flow, balance sheet strength, and overall efficiency.
  
• Portfolio risk from business exits, underperformance in key growth areas, and integration challenges threaten margin expansion and stable revenue amid evolving market and operational pressures.

Catalysts

Provides security services in North America, Europe, Latin America, Africa, the Middle East, Asia, and Australia.

• Securitas is capitalizing on rising urbanization and increasing global wealth by focusing investments into technology and data-driven security solutions, positioning itself to capture premium, higher-margin contracts in a growing addressable market, which should drive sustained revenue and margin expansion.
  
• Growing frequency and sophistication of security threats are leading corporate clients to invest more in advanced and integrated security services; Securitas' strategic pivot toward higher-value Technology & Solutions offerings positions it well to benefit from this demand, supporting topline growth and improved profitability.
  
• The closure of low-margin, working-capital intensive government contracts and ongoing active portfolio management are expected to sharpen Securitas' focus and yield substantial improvements in operating margins and cash flow over the next 18–24 months.
  
• The company's European transformation and business optimization programs are on track to deliver substantial cost savings (SEK 200 million by year-end), with AI
• and digital initiatives providing meaningful operating leverage, which will bolster net income and margin expansion.
  
• Deleveraging and improved working capital management have strengthened the balance sheet and reduced interest costs, while continued repurposing of capital toward scalable, tech-enabled services should increase returns on capital and drive higher earnings per share.

Securitas Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Securitas's revenue will decrease by 0.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.3% today to 4.9% in 3 years time.
• Analysts expect earnings to reach SEK 8.2 billion (and earnings per share of SEK 13.39) by about July 2028, up from SEK 5.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK9.6 billion in earnings, and the most bearish expecting SEK6.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, down from 14.9x today. This future PE is lower than the current PE for the GB Commercial Services industry at 19.7x.
• 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 5.87%, as per the Simply Wall St company report.

Securitas Future Earnings Per Share Growth

Risks

• The closure of the SCIS government business, accounting for a significant portion of group revenue, highlights Securitas' ongoing exposure to contract and portfolio risk; if similar strategic exits or divestitures are needed in the future, this could lead to episodic revenue declines or restructuring costs, negatively impacting total revenue and potentially delaying consistent margin improvement.
  
• The Technology & Solutions segment, considered a key growth and margin driver, has recently underperformed expectations, particularly in the U.S.; if Securitas cannot accelerate growth and commercial momentum in this higher-value segment or faces ongoing operational challenges in its "go-to-market" approach, the anticipated boost to overall company revenue and net margins may be less than forecast.
  
• Securitas' business optimization and digital transformation initiatives, including cost savings driven by AI and digital tools, have a defined scope and timeline; if longer-term labor cost inflation, pressure on local service delivery, or slower-than-expected adoption of automation outpaces these internal efficiency gains, net profit margin expansion could be constrained in a labor-intensive sector.
  
• Persistent macroeconomic uncertainty and shifting client priorities, such as budget cuts or reallocations from physical to digital security amid evolving security threats, could reduce demand for traditional and hybrid security services, resulting in lower contract volumes and top-line revenue.
  
• Execution risk remains elevated following recent large acquisitions and ongoing portfolio reshaping (e.g., STANLEY, SCIS closure); if Securitas faces integration challenges, fails to fully realize anticipated synergies, or incurs further one-off charges, both near-term earnings and long-term sustainable profitability could be negatively affected.

Valuation

• The analysts have a consensus price target of SEK146.75 for Securitas 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 SEK180.0, and the most bearish reporting a price target of just SEK110.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK165.5 billion, earnings will come to SEK8.2 billion, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 5.9%.
  
• Given the current share price of SEK141.1, the analyst price target of SEK146.75 is 3.9% 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.