Launching ‘Avenue’ Will Revolutionize Retail Shelf Spaces

Key Takeaways

• Strategic shift towards in-store digitalization aims for long-term growth and strengthened client relationships, boosting revenue and market share.
  
• Expanding in priority markets with streamlined operations focuses on enhanced revenue growth, improved margins, and operational efficiency.
  
• Increased inventory levels and execution risks could affect net margins amid declining net sales and potential cost pressures from tariffs and inflation.

Catalysts

Provides in-store digital solutions in Europe, the Middle East and Africa, the Americas, and Asia and Pacific.

• Pricer's strategic shift towards becoming the preferred partner for in-store communication and digitalization suggests a focus on long-term growth through innovation and strengthening client relationships, likely boosting revenue and market share.
  
• The introduction of Pricer Avenue, an innovative ESL concept that transforms shelf spaces into interactive merchandise areas, is expected to attract significant customer interest and drive recurring revenue streams and higher gross profits.
  
• Expansion in priority markets, including the U.S. and U.K., with additional resources dedicated to capturing opportunities, is anticipated to enhance revenue growth and increase Pricer's presence in key regions.
  
• Streamlining operations and focusing on profitable growth while containing OpEx growth (less scaling of expenses with sales) aims to improve net margins and operational efficiency.
  
• Building a new sales organization for the Nordic and Baltic markets to enhance direct customer relationships is expected to increase sales and margins by capturing more value from the existing customer base directly.

Pricer Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Pricer's revenue will grow by 13.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.8% today to 6.7% in 3 years time.
• Analysts expect earnings to reach SEK 268.4 million (and earnings per share of SEK 1.48) by about February 2028, up from SEK 102.9 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 13.5x on those 2028 earnings, down from 16.7x today. This future PE is lower than the current PE for the GB Electronic industry at 24.0x.
• 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 6.08%, as per the Simply Wall St company report.

Pricer Future Earnings Per Share Growth

Risks

• The company faces significant operational risks associated with increased inventory levels due to pushed sales, which could lead to cash flow challenges and affect net margins.
  
• While order intake appears strong, net sales have slightly declined, which could raise concerns about the company's ability to convert orders into revenue effectively.
  
• There is potential exposure to increased operating expenses and inflationary pressures in 2025, which could impact profitability and net margins.
  
• The company's transition to direct sales in certain regions, such as the Nordics, involves execution risks and cost implications that could affect future revenues and margins.
  
• The possibility of tariffs on goods imported from Europe into the U.S. presents a risk of increased costs, potentially impacting the company's competitive pricing ability and net margins.

Valuation

• The analysts have a consensus price target of SEK18.5 for Pricer 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 SEK4.0 billion, earnings will come to SEK268.4 million, and it would be trading on a PE ratio of 13.5x, assuming you use a discount rate of 6.1%.
  
• Given the current share price of SEK10.46, the analyst price target of SEK18.5 is 43.5% 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.