Digital Transformation Will Unlock Global SaaS Opportunities

Key Takeaways

• Refocusing on SaaS and divesting non-core segments should boost innovation, expand recurring revenues, and improve profitability through a scalable subscription-based model.
  
• Leveraging regulatory complexity, ERP integrations, and AI-powered features positions Formpipe to capture new markets, enhance pricing power, and drive sustained growth.
  
• Divestment, slow core growth, reliance on Microsoft Dynamics, acquisition risks, and tech investment needs heighten Formpipe's vulnerability and threaten margin expansion.

Catalysts

Provides software and consulting services for capturing, managing, and distributing information in Sweden, Denmark, rest of Nordic countries, the United Kingdom, Germany, rest of Europe, North America, and internationally.

• The divestment of the Public business will allow Formpipe to redeploy capital and management attention exclusively to the high-growth, SaaS-driven Lasernet segment, enabling increased investment in core product innovation, cross-selling, and go-to-market strategies-potentially accelerating recurring revenue growth and improving net margins.
  
• The global trend toward digital transformation, heightened by increasing adoption of cloud-based enterprise software and demand for secure, automated document management, is expected to expand Formpipe's addressable market and support sustained ARR (annual recurring revenue) growth, especially as organizations modernize operations in both public and private sectors.
  
• Regulatory complexity and rising data compliance requirements (including GDPR and industry-specific mandates) are driving greater enterprise reliance on specialized information management vendors; Formpipe's solutions-especially in compliance-driven sectors like Bank & Finance-stand to benefit from stable, recurring revenues and potentially higher pricing, supporting long-term top-line and margin expansion.
  
• Formpipe's go-forward focus on integrations with leading ERP ecosystems (notably Microsoft Dynamics) and investments in adjacent product functionality (such as new AI modules) are positioned to unlock upsell/cross-sell opportunities and entry into new verticals and geographies (e.g., US, DACH), directly enhancing revenue scalability.
  
• Increased operational focus on SaaS/subscription-based models and de-emphasis of the lower-growth, less scalable on-premise/licensing businesses are likely to drive a higher proportion of predictable, high-margin recurring revenues, thereby raising earnings visibility, supporting EBITDA margin expansion, and potentially justifying a market re-rating.

Formpipe Software Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Formpipe Software's revenue will grow by 8.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.3% today to 20.0% in 3 years time.
• Analysts expect earnings to reach SEK 139.4 million (and earnings per share of SEK 1.89) by about August 2028, up from SEK 12.6 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 16.3x on those 2028 earnings, down from 124.7x today. This future PE is lower than the current PE for the GB Software industry at 34.6x.
• 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 6.4%, as per the Simply Wall St company report.

Formpipe Software Future Earnings Per Share Growth

Risks

• The divestment of the profitable Public business (which had higher margins and larger net sales than Lasernet) leaves Formpipe with a smaller, less diversified, and lower-margin revenue base, increasing vulnerability to market downturns or concentration risk, which could negatively impact future revenue growth and net margins.
  
• Lasernet's recent growth rates (7% YoY) are below management's expectations and indicate challenges in accelerating ARR or expanding market penetration, particularly as Bank & Finance performance has been weak-this suggests possible stagnation or revenue headwinds in core markets.
  
• Heavy dependence on Microsoft Dynamics and a relatively narrow mid
• to large-sized company niche exposes Formpipe to shifts in ERP ecosystem strategies, platform competition (including built-in document solutions), or slowdowns in Dynamics growth, increasing risk of customer churn and limiting revenue scalability.
  
• Management's intention to pursue acquisitions for geographic and product expansion carries execution risk, integration challenges, and the possibility of overpaying or failing to generate the intended synergies, which may erode net margins or dilute earnings if not well-executed.
  
• Ongoing investments will be required to keep the product platform "relevant" against rapid technological advances (including automation and AI) and escalating customer demands for integrated solutions, necessitating higher R&D and sales spend, which could compress margins or reduce earnings if top-line growth stalls.

Valuation

• The analysts have a consensus price target of SEK35.0 for Formpipe Software 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 SEK696.8 million, earnings will come to SEK139.4 million, and it would be trading on a PE ratio of 16.3x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of SEK28.9, the analyst price target of SEK35.0 is 17.4% 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.