Expansion In Europe And Sustainability Focus Will Drive Lasting Success

Key Takeaways

• Expansion into new European markets and focus on premium, sustainable products are expected to drive market leadership and revenue growth.
  
• Shifting to higher-margin own brands and investing in automation will enhance profitability and operational efficiency over time.
  
• Prolonged market weakness, challenging integrations, and external cost pressures threaten profitability, cash flow, and the success of expansion and brand strategies.

Catalysts

Designs, acquires, and develops brands and products in the corporate, sports, gifts, and home furnishings sectors in Sweden, the United States, Central Europe, rest of Nordiac countries, Southern Europe, and internationally.

• Expansion into Central and Eastern Europe through the Cotton Classics acquisition is expected to significantly broaden the company's geographic reach and market leadership, positioning New Wave Group to benefit from urbanization and increasing middle-class incomes in these regions, which should support top-line revenue growth over the coming years.
  
• Accelerated shift toward introducing higher-margin own-brand assortments into newly acquired platforms like Cotton Classics and B2C is projected to substantially lift gross margins and earnings over a 3–4 year horizon, as own brands deliver more than double the gross margin compared to distributed brands.
  
• Ongoing investment in sales, marketing, IT, and warehouse automation-despite near-term margin dilution and increased operating expenses-creates future operating leverage and cost efficiencies, likely boosting net margins and profitability as market conditions normalize.
  
• The company's strong balance sheet and proactive acquisition strategy provide resilience and capital for continued international expansion and product innovation, enhancing revenue diversification and supporting long-term earnings growth.
  
• Persistent focus on sustainable sourcing, transparency, and responsible production aligns the business with evolving consumer and regulatory expectations, which supports premium pricing power and improves gross margins as demand for sustainable products continues to rise.

New Wave Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming New Wave Group's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.9% today to 12.3% in 3 years time.
• Analysts expect earnings to reach SEK 1.5 billion (and earnings per share of SEK 10.51) by about August 2028, up from SEK 860.4 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK1.2 billion.
• 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 16.5x today. This future PE is lower than the current PE for the GB Luxury industry at 16.6x.
• 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 6.78%, as per the Simply Wall St company report.

New Wave Group Future Earnings Per Share Growth

Risks

• Persistent weakness and volatility in core retail and promo markets, with several mentions of tough conditions and lack of visible recovery, pose long-term risks to revenue growth and make organic expansion uncertain.
  
• The Cotton Classics acquisition will dilute operating margins for several years, as its current 5–6% margin is well below group average, directly impacting group-wide profitability and potentially dragging down overall net earnings in the medium term.
  
• Ongoing uncertainty around global tariffs, trade duties, and currency headwinds are already impacting financial results and could escalate, raising cost of goods sold and introducing structural risks to both revenue and earnings stability long-term.
  
• Heavy and sustained investment in IT, automation, warehousing, and expansion (U.S., Ireland, Germany) without immediate revenue payback puts pressure on cash flows and increases operating leverage, risking lower net margins or negative free cash flow if market recovery is delayed.
  
• Slow progress and execution risks in integrating and growing high-margin proprietary brands in acquired markets (B2C, Cotton Classics) may fail to deliver targeted profitability improvements, limiting gross margin expansion and negatively affecting group earnings over the long term.

Valuation

• The analysts have a consensus price target of SEK129.0 for New Wave Group 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 SEK12.5 billion, earnings will come to SEK1.5 billion, and it would be trading on a PE ratio of 13.5x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of SEK106.8, the analyst price target of SEK129.0 is 17.2% 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.