Catalysts
New product launches, such as Pro-B3, D30, and the upcoming film industry product, could drive sales and earnings growth.
Industry tailwinds in professional lighting and imaging could help, however currently no such signs in the reports.
Assumptions
Revenue between 2022 and 2025 shows a –4.8% CAGR, while 2020 to 2023 experienced +14.2%; the midpoint is about +4.7% per year. Which will form the applicable growth rate in the valuation model
Historical operating profit margins average around 20–21%, so targeting 20–22% is reasonable. 21 % forms the basis of the valuation.
A discount rate of 10% (Simply Wall street putting in around 7%) is used to account for short‑term cash flow pressures and rising debt risks.
Risks
Continued weak growth and earnings volatility may pressure margins and delay turnaround catalysts.
Elevated debt (58% Debt/Equity) and cash flow challenges:
- -35 mSEK free cash flow;
- free cash flow not covering dividends and;
- high degree of non cash earnings)
could force the company to trade at lower multiples. This could also lead to that the dividends gets revoked causing more uncertainty and worst case a new share issue.
Valuation
A 10% discount rate and 4–5% growth yields a PE of about 16.7x to 20x.
Thus, a fair three‑year PE range is roughly 17x–20x, with a midpoint around 18–19x, although risks could push valuations lower.
Future PE ratio set to 18.5 in model.
At this point given the uncertanties - I will sell my shares untill I see improvements as per below.
To be on the lookout for
- a turnaround in top‑line growth of at least 4–5% and
- improvements in cash flow to levels sustainably covering the reported earnings,
- while monitoring that debt levels remain flat (around 60% Debt/Equity) or decrease.
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Disclaimer
The user Mandelman holds no position in OM:PRFO. Simply Wall St has no position in any of the companies 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 author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does 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 the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
