Last Update 25 Feb 26
QTX: Shares Will Rise As Dividend Shift And Accounting Changes Support Upside
Analysts have made only a marginal adjustment to their Quartix Technologies price target, keeping it effectively unchanged in £ terms. Updated assumptions on the discount rate, revenue growth, profit margin and future P/E remain closely aligned with prior estimates.
What's in the News
- The Financial Reporting Council review concluded that Quartix tracking systems should be classified as property, plant and equipment under IAS 16. This led to a change in accounting policy and a prior period adjustment for replacement units in France and the USA (Key Developments).
- Quartix indicated that the revised accounting policy is expected to result in a moderate increase in reported profit for the year ended 31 December 2025, compared with the outcome under the previous policy (Key Developments).
- The company plans to release its financial results for the year ended 31 December 2025 by the end of March, reflecting the additional work required on the accounting adjustments and disclosures (Key Developments).
- The Board intends to consolidate the separate ordinary and supplementary dividends into a single ordinary dividend, with the detailed policy to be set out in the annual report (Key Developments).
- A final dividend of 7.5 pence per share is expected to be recommended. This would bring the total ordinary dividend to 10 pence per share for 2025, subject to approval of the new policy and the dividend at the AGM (Key Developments).
Valuation Changes
- The fair value estimate of £3.6 remains unchanged in the updated analysis.
- The discount rate is reported as 8.79% in both the prior and updated assumptions.
- Revenue growth is kept effectively the same at around 11.21% in both the prior and updated models.
- The net profit margin is broadly unchanged at around 16.81% in the refreshed estimates.
- The future P/E is maintained at roughly 28.36x in the updated valuation work.
Key Takeaways
- Strategic focus on key markets and investment in sales aims to drive recurring revenue and improve operational efficiency without increasing customer attrition.
- Cost-reduction measures and market expansion in underutilized regions are poised to enhance competitive positioning and boost both margins and market share.
- Slow ARR growth, high operating costs, and market underperformance, coupled with costly upgrades, pose risks to Quartix's revenue, margins, and profitability.
Catalysts
About Quartix Technologies- Engages in the design, development, marketing, and delivery of vehicle telematics services in the United Kingdom, France, the United States, and other European Territories.
- The re-establishment of customer acquisition focus and growth in key markets such as the UK and USA is expected to drive an increase in recurring revenues, positively impacting future revenue growth.
- The strategic price indexation to counteract increased input costs is anticipated to support net margins without affecting customer attrition, which could enhance earnings stability.
- A significant reduction in overheads, alongside increased investment in sales and marketing, positions Quartix for improved operational efficiency and net margins.
- The redesigned and cost-reduced telematics hardware, along with planned software updates, aims to bolster performance while reducing costs, likely leading to margin improvements and stronger competitiveness in the market.
- Expansion in existing target markets with a high potential for ARR growth, particularly in underexploited regions like Italy, Spain, and Germany, is expected to significantly drive revenue and market share.
Quartix Technologies Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Quartix Technologies's revenue will grow by 9.2% annually over the next 3 years.
- Analysts are assuming Quartix Technologies's profit margins will remain the same at 15.5% over the next 3 years.
- Analysts expect earnings to reach £6.8 million (and earnings per share of £0.15) by about September 2028, up from £5.3 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 28.8x on those 2028 earnings, up from 26.7x today. This future PE is lower than the current PE for the GB Software industry at 37.6x.
- Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.63%, as per the Simply Wall St company report.
Quartix Technologies Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The slowdown in customer acquisition in 2022 and 2023 affected annualized recurring revenue (ARR) growth, which could indicate challenges in driving revenue growth consistently. This suggests potential volatility in future revenues.
- Quartix faced increased operating costs and had to implement price indexation for subscriptions to manage input cost pressures. If price hikes lead to customer dissatisfaction, it could impact revenue retention and net margins.
- The liquidation of the Konetik Deutschland acquisition due to its costs and inability to generate revenues highlights the risk of poor management decisions negatively impacting net margins and earnings.
- Despite expanding their footprint in multiple countries, some markets like Italy, Spain, and Germany remain small in terms of ARR contribution, posing a risk to overall revenue growth and suggesting potential underperformance in some regions.
- The need for substantial upgrades, such as the 4G upgrade in France, incurs significant costs that could affect free cash flow and profitability until these investments yield desired efficiencies and returns.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of £3.2 for Quartix Technologies 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 £44.2 million, earnings will come to £6.8 million, and it would be trading on a PE ratio of 28.8x, assuming you use a discount rate of 8.6%.
- Given the current share price of £2.9, the analyst price target of £3.2 is 9.4% 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.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.