Proprietary Software Expansion Within Autodesk Ecosystem Will Support Future Opportunities

Key Takeaways

• Transitioning to an agent model has improved margins, supporting future profitability despite decreases in net sales.
  
• Strong cash flow and low debt enable acquisitive growth, enhancing earnings potential and financial leverage.
  
• Transition to an agent model and third-party agreement reclassification may reduce perceived revenue growth, compounded by challenges in the German market and shifting customer preferences.

Catalysts

Offers software and services for the design, construction, product data information, project collaboration, and facility management in Sweden, Nordic countries, the United States, the United Kingdom, Germany, and internationally.

• The transition from a reseller to an agent model for the Autodesk business has resulted in a decrease in net sales but not in gross profit, EBITDA, or cash flow, which has improved margins. This strategic shift is expected to support future EBITDA margins and profitability.
  
• Ongoing diversification and strong positions in sectors with structural growth—such as life sciences, manufacturing, and digital solutions—highlight potential for sustainable revenue growth despite economic uncertainties.
  
• The company’s strong cash flow from operations and low debt levels allow for continued acquisitive growth, which is a core part of its strategy. This facilitates potential earnings growth and improved financial leverage.
  
• Increased penetration of proprietary software, particularly through the acquisition of CTC Software, enhances revenue potential and margin improvements, particularly within the Autodesk ecosystem.
  
• Continuous investment in product development and strategic acquisitions, such as Congere, indicates a proactive approach to expanding market share and revenue streams, supporting higher future earnings.

Addnode Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Addnode Group's revenue will decrease by -0.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.2% today to 9.2% in 3 years time.
• Analysts expect earnings to reach SEK 708.9 million (and earnings per share of SEK 5.32) by about February 2028, up from SEK 402.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.2x on those 2028 earnings, down from 39.2x today. This future PE is greater than the current PE for the GB IT industry at 15.1x.
• 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 5.9%, as per the Simply Wall St company report.

Addnode Group Future Earnings Per Share Growth

Risks

• The transition from a reseller to an agent model for the Autodesk business reduced net sales, which could impact revenue growth and investor perception of business expansion capabilities.
  
• Economic and geopolitical uncertainties may lead to slow decision-making processes for new and larger system projects, potentially affecting future revenue streams.
  
• The German market, a significant part of Addnode Group's sales, is challenging and expected to remain difficult, potentially impacting revenue growth in 2025.
  
• Reclassification of third-party agreements has negatively impacted reported net sales, which could affect how revenue growth is perceived, despite unchanged gross profit and EBITDA.
  
• Customer preferences shifting from lifelong license purchases to rental agreements could impact revenue consistency and long-term earnings visibility, especially if not managed effectively.

Valuation

• The analysts have a consensus price target of SEK117.4 for Addnode 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 SEK7.7 billion, earnings will come to SEK708.9 million, and it would be trading on a PE ratio of 26.2x, assuming you use a discount rate of 5.9%.
  
• Given the current share price of SEK118.1, the analyst's price target of SEK117.4 is 0.6% lower. 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.