Restructuring And EdTech Expansion Will Drive Future Success

Key Takeaways

• Restructuring and cost optimization are key to achieving profitability, with efforts focused on enhancing net margins via operating expense reductions.
  
• Strategic international expansion and targeted marketing aim to drive revenue growth by capturing new markets and enhancing user engagement.
  
• Increased marketing and restructuring expenses, coupled with high market entry costs, have strained profitability amidst competitive and integration risks in the EdTech industry.

Catalysts

Develops and markets digital education services on a subscription basis to private individuals and schools in Sweden and internationally.

• Albert Group aims to achieve positive EBITDA in 2025 and positive cash flow in 2026 by restructuring and focusing on high-performing areas, which is expected to improve net margins and ultimately lead to profitability.
  
• The company has reduced personnel costs significantly through restructuring and optimization efforts, which should positively impact their net margins by lowering operating expenses.
  
• Increased marketing and sales efforts in 2024 have resulted in higher invoice sales and are expected to enhance revenue growth in the future, driven by a focus on both B2C and B2B customer acquisition.
  
• The company is expanding into new international markets, such as the Czech Republic and Romania, and developing localized, curriculum-aligned products for regions like Texas, which is projected to drive revenue growth through international expansion and market-specific offerings.
  
• Sustained investment in product development and customer success strategies aims to enhance user engagement and reduce churn, improving long-term revenue stability and supporting overall earnings growth.

eEducation Albert Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming eEducation Albert's revenue will grow by 8.7% annually over the next 3 years.
• Analysts are not forecasting that eEducation Albert will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate eEducation Albert's profit margin will increase from -56.7% to the average SE Consumer Services industry of 4.6% in 3 years.
• If eEducation Albert's profit margin were to converge on the industry average, you could expect earnings to reach SEK 10.8 million (and earnings per share of SEK 0.43) by about May 2028, up from SEK -104.8 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 18.8x on those 2028 earnings, up from -0.8x today. This future PE is lower than the current PE for the SE Consumer Services industry at 21.0x.
• 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 5.2%, as per the Simply Wall St company report.

eEducation Albert Future Earnings Per Share Growth

Risks

• The company has experienced a dip in profitability due to increased marketing expenses, which has negatively affected their net margins.
  
• The focus on entering new markets such as the Czech Republic and Romania requires significant investment, which may increase operational costs and delay profitability, affecting earnings.
  
• Restructuring costs and decreased capitalized R&D have contributed to the lower EBITDA, impacting net income.
  
• There is a competitive risk in the EdTech industry, which could affect revenue growth and market share, particularly impacting future revenues.
  
• The dependency on successful integration and synergy realization from acquisitions may lead to execution risks, potentially affecting cost management and profitability.

Valuation

• The analysts have a consensus price target of SEK7.0 for eEducation Albert 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 SEK237.0 million, earnings will come to SEK10.8 million, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 5.2%.
• Given the current share price of SEK3.43, the analyst price target of SEK7.0 is 51.0% 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.