Last Update 15 Dec 25

MCG: Recalibrated Price Outlook Will Support Renewed Confidence In Future Upside Potential

Analysts have trimmed their price target on Mobico Group to 30 GBp from 35 GBp, reflecting more cautious assumptions on the near term risk reward while maintaining a neutral stance on the shares.

Analyst Commentary

Bullish analysts view the maintained neutral rating and modestly reduced price target as a signal that the stock still offers reasonable value relative to its fundamentals, even as near term expectations are tempered.

They point to the updated target as an attempt to better align valuation with execution risks, rather than a wholesale change in the long term investment case.

Bullish Takeaways

Bullish analysts highlight that, despite the lower target, the new level still implies some upside from current trading levels, suggesting that longer term growth and margin recovery potential remain in play.
The decision to keep a neutral stance rather than move to an outright negative view is seen as evidence that operational challenges are considered manageable within the existing business model.
Some investors may interpret the recalibrated target as having de risked expectations, potentially creating a more attractive entry point if management can execute on cost control and revenue initiatives.
The updated valuation framework is viewed as more realistic, which could support a more stable share price if the company meets or modestly exceeds reset forecasts.

Bearish Takeaways

Bearish analysts see the target reduction as a signal that near term earnings visibility has weakened, with execution risks around cost inflation, demand normalization, and contract profitability weighing on the outlook.
The narrower implied upside suggests limited scope for multiple expansion until the company can demonstrate consistent delivery against financial and operational targets.
Concerns persist that any delays in improving cash generation or reducing leverage could constrain strategic flexibility and cap valuation in the medium term.
The maintenance of a neutral rating, coupled with a lower target, reinforces the view that the shares may remain range bound until there is clearer evidence of sustainable growth and margin improvement.

What's in the News

ALSA, Mobico Group's subsidiary, secured an eight year, capital light joint venture contract in Saudi Arabia worth approximately €500 million. It will operate 156 vehicles, mostly electric, to serve the new Qiddiya city near Riyadh and expand Park and Ride and shuttle services in the region (Key Developments).
Mobico Group announced that Deloitte LLP resigned as the company's auditor, with the resignation taking effect on 19 September 2025 (Key Developments).
The company appointed KPMG LLP as its new auditor, effective 26 November 2025, marking a planned transition in its external audit relationship (Key Developments).
Mobico Group is changing its accounting reference date and financial year end from 31 December to 31 March, effective 26 November 2025. This will alter the timing and comparability of future financial reporting periods (Key Developments).

Valuation Changes

Fair Value Estimate remains unchanged at £0.37 per share, indicating no revision to the intrinsic value assessment.
The Discount Rate is stable at 13.2 percent, reflecting no change in the perceived risk profile or cost of capital assumptions.
Revenue Growth is effectively unchanged at around negative 6.3 percent, with only immaterial model refinements applied.
The Net Profit Margin is flat at approximately 6.3 percent, with rounding differences too small to affect the valuation narrative.
The Future P/E is steady at about 1.8x earnings, implying no shift in the forward earnings multiple applied to the shares.

Strategic divestment and focus on growth areas like ALSA and WeDriveU aim to boost revenue and profitability through asset-light, diversified ventures.
Debt reduction and profit improvement initiatives are expected to enhance liquidity and lower costs, positively impacting earnings and shareholder value.
Challenges in the German rail sector, financial liabilities, and cautious reinvestment after asset sales could impact future revenue, profitability, and growth opportunities.

Catalysts

About Mobico Group

Designs, mobilizes, and operates transport services worldwide.What are the underlying business or industry changes driving this perspective?

The divestment of the North America School Bus business allows Mobico to reallocate cash flows away from a heavy capital-intensive business and focus on more attractive growth opportunities in ALSA and WeDriveU, likely impacting future revenue and earnings positively.
ALSA's record results and ongoing diversification into new sectors and geographies, such as expanding into medical transport and international markets like Saudi Arabia, provide opportunities for continued revenue growth.
The strategic focus on winning asset-light contracts, particularly with WeDriveU, reduces capital expenditure requirements and could enhance margins, leading to improved profitability and return on capital employed.
The Accelerate profit improvement initiative, which has delivered ahead of expectations, helps to embed cost savings and improve operating profits, thus positively impacting net margins.
Continued focus on debt reduction through cash improvement initiatives, the successful sale of the School Bus business, and improved liquidity position is expected to enhance earnings through lower interest costs, offering potential upward changes to earnings per share.

Mobico Group Earnings and Revenue Growth

Mobico Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Mobico Group's revenue will decrease by 3.9% annually over the next 3 years.
Analysts assume that profit margins will increase from -24.2% today to 2.9% in 3 years time.
Analysts expect earnings to reach £88.5 million (and earnings per share of £0.12) by about September 2028, up from £-824.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting £116 million in earnings, and the most bearish expecting £61 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.1x on those 2028 earnings, up from -0.2x today. This future PE is lower than the current PE for the GB Transportation industry at 9.1x.
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 12.94%, as per the Simply Wall St company report.

Mobico Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company faces significant challenges in the German rail business, including unresolved Public Transport Authority (PTA) negotiations and persistent driver shortages, which could adversely impact future revenue and profitability.
The statutory loss for the year, driven by impairments and adjusting items, suggests underlying problems in certain business units that could continue to affect net margins.
Uncertainty in the outcome of the onerous contract provision in German Rail, due to infrastructure disruptions and higher penalties, could lead to continued financial liabilities affecting future earnings.
The significant amount of debt, despite improvement in covenant gearing, suggests financial risk remains, which might impact future financial flexibility and net earnings.
The sale of the North America School Bus business, while reducing net debt, requires careful reinvestment to achieve growth, but its divestment reduces revenue scope and might put pressure on earnings if replacement growth opportunities underperform.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £0.517 for Mobico Group 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 £1.2, and the most bearish reporting a price target of just £0.3.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £3.0 billion, earnings will come to £88.5 million, and it would be trading on a PE ratio of 5.1x, assuming you use a discount rate of 12.9%.
Given the current share price of £0.32, the analyst price target of £0.52 is 38.9% 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.

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