Expanding Global Litigation Funding Will Unlock New Markets

Key Takeaways

• Robust demand and global diversification are driving a strong, expanding pipeline and reducing portfolio risk for sustained, scalable revenue growth.
  
• Access to large-scale, low-cost capital and a focus on high-value intellectual property cases position Burford for higher margins and long-term profit scalability.
  
• Heavy dependence on a single case, regulatory and geographic risks, valuation uncertainties, and rising competition threaten revenue stability, growth prospects, and profitability.

Catalysts

Provides legal finance products and services worldwide.

• Continued strong new business origination and rapid growth in new case commitments reflect robust demand for litigation funding globally, as more companies face cross-border disputes and complex litigations-supporting higher future revenues and case pipeline expansion.
  
• Increasing volume and complexity of intellectual property cases, alongside digitalization trends, are translating into a growing pipeline of high-value IP litigation finance opportunities for Burford, likely to drive sustained, higher-margin income over time.
  
• Burford's unique access to large-scale, attractively priced capital through recent debt issuances bolsters its ability to invest in larger and more cases at lower cost than competitors-positively impacting net margins and long-term profit scalability.
  
• Platform diversification across geographies, legal verticals, and risk/duration characteristics is translating into a more robust, less volatile portfolio with greater ability to consistently realize gains and improve risk-adjusted earnings.
  
• Ongoing operational scaling, particularly through investment in local presence and expansion into new markets (e.g., Korea, Spain), is expected to further enhance global deal origination, reduce dependency on single large cases, and support long-term revenue growth.

Burford Capital Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Burford Capital's revenue will grow by 31.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 54.6% today to 49.9% in 3 years time.
• Analysts expect earnings to reach $497.5 million (and earnings per share of $2.25) by about August 2028, up from $241.9 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 11.1x on those 2028 earnings, down from 12.3x today. This future PE is lower than the current PE for the GB Diversified Financial industry at 16.4x.
• Analysts expect the number of shares outstanding to decline by 0.27% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.79%, as per the Simply Wall St company report.

Burford Capital Future Earnings Per Share Growth

Risks

• Over-concentration risk remains significant, as approximately 43% of Burford's fair value assets are tied to the YPF case; adverse rulings, long appeals, or enforcement difficulties in this single matter could create substantial volatility in revenue recognition and earnings realization.
  
• Increasing regulatory scrutiny and persistent lobbying by deep-pocketed corporate defendants and the insurance industry against litigation finance could lead to new restrictions or unfavorable legal reforms, potentially reducing Burford's ability to originate new cases and constraining future revenue growth.
  
• Geographic expansion and diversification may expose Burford to operational scaling challenges and jurisdictional risks-especially in emerging markets-where uneven legal standards, delays, or weak enforceability of awards could result in higher costs, extended cash conversion cycles, or outright non-collection, impairing net margins and cashflow stability.
  
• Difficulties in valuing legal assets and ongoing reliance on fair-value adjustments-especially with milestone-driven cases like YPF-introduce earnings and balance sheet volatility, which could undermine investor confidence, create unpredictable swings in reported net income, and potentially depress valuation multiples.
  
• The increasing presence of new competitors and capital inflows into litigation finance may compress returns for established players such as Burford, exerting downward pressure on pricing power, portfolio returns, and net margins over the long term.

Valuation

• The analysts have a consensus price target of $19.7 for Burford Capital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $22.5, and the most bearish reporting a price target of just $18.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $996.5 million, earnings will come to $497.5 million, and it would be trading on a PE ratio of 11.1x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $13.58, the analyst price target of $19.7 is 31.1% 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.