Last Update05 Oct 25Fair value Decreased 7.26%
Analysts have lowered their fair value estimate for Thule Group from SEK 317 to SEK 294, citing moderating revenue growth and profit margin forecasts. They acknowledge improving conditions after recent results.
Analyst Commentary
Following recent results and the updated outlook for Thule Group, analysts have provided detailed perspectives highlighting both strengths and ongoing challenges for the company.
Bullish Takeaways- Bullish analysts see the latest quarterly results as a pivotal moment. They suggest the most significant margin pressure is now in the past and a more favorable environment is emerging for the remainder of the year.
- High conviction is evident in the raised price targets, reflecting enhanced confidence in Thule Group's ability to execute on its growth strategy through 2025.
- Expectations for improving profit margins and operational efficiencies are seen as key catalysts that could support renewed momentum in the share price.
- The constructive setup for the second half is underpinned by anticipated recovery in market demand and stabilization in input costs.
- Some analysts remain cautious, noting that while front-loaded margin pressures may have subsided, sustained improvement is dependent on the pace of revenue growth and broader market conditions.
- There are ongoing concerns regarding the company's ability to consistently deliver on profit margin expansion, especially if underlying demand softens or inflationary pressures return.
- The recent fair value estimate revision suggests tempering of growth projections. This signals that the road to recovery is not without risks.
What's in the News
- Thule Group recently held an Analyst/Investor Day to update stakeholders on business developments and strategic priorities (Key Developments).
Valuation Changes
- Fair Value Estimate has been lowered from SEK 317 to SEK 294, reflecting a decrease of roughly 7%.
- The discount rate has been reduced slightly from 5.65% to 5.63%.
- Revenue growth has decreased from 6.79% to 6.03% as projections moderate.
- The net profit margin has been adjusted down from 14.78% to 14.19%.
- The future P/E ratio has been marginally decreased from 23.47x to 23.15x.
Key Takeaways
- Strategic product focus and acquisitions, like Quad Lock, could drive revenue growth and improve net margins due to a better product mix.
- Enhanced North American strategy includes market shifts and price adjustments to protect revenue, thus ensuring profitable growth in challenging conditions.
- Weakness in the North American market and cautious retailer inventory strategies may impact Thule's revenue growth, while price hikes could further dampen demand.
Catalysts
About Thule Group- Operates as a sports and outdoor company.
- Thule Group's strong gross margin increase to 44.8%, partly driven by the high-margin Quad Lock acquisition and better product mix, indicates potential for future revenue growth and improved net margins if these trends continue.
- The strategic shift in North America to focus on high-return areas, like bike carriers and pickup trucks, coupled with the new sales organization, may bolster future revenue growth in this geographically weak yet significant market.
- Planned price increases of 10% in North America to offset tariffs are expected to protect revenue and margins, ensuring profitable growth despite the challenging market conditions.
- The continued development of new product launches, with several successful entries already recognized with design awards, suggests potential for increased future sales and market share, translating to higher future revenues.
- Thule's increased focus on reducing inventory by SEK 200 million and ongoing supply chain efficiencies are likely to enhance cash flow and net margins as they improve operational efficiency.
Thule Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Thule Group's revenue will grow by 7.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 10.3% today to 15.1% in 3 years time.
- Analysts expect earnings to reach SEK 1.9 billion (and earnings per share of SEK 15.57) by about September 2028, up from SEK 1.0 billion today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.3x on those 2028 earnings, down from 26.6x today. This future PE is lower than the current PE for the GB Leisure industry at 74.2x.
- Analysts expect the number of shares outstanding to grow by 1.99% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 5.5%, as per the Simply Wall St company report.
Thule Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The North American market is weak, and Thule expects this trend to continue, indicating potential impacts on revenue and overall growth in this large segment of its business.
- Retailers in several regions, including Europe, are cautious in building inventory, possibly leading to lower short-term sales and impacting revenue growth.
- The ending of the North American car seat project shows a shift away from potential growth avenues in that region, which might limit future revenue opportunities.
- Thule's cash flow from operations was negative in the quarter, driven by a seasonal increase in working capital and FX impacts, which could affect short-term financial flexibility.
- Price increases to counteract tariffs could impact demand if consumers and retailers are unable or unwilling to absorb the higher costs, leading to potential revenue implications.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of SEK326.0 for Thule 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 SEK12.4 billion, earnings will come to SEK1.9 billion, and it would be trading on a PE ratio of 23.3x, assuming you use a discount rate of 5.5%.
- Given the current share price of SEK257.0, the analyst price target of SEK326.0 is 21.2% 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.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget 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 AnalystConsensusTarget 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 AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.