Aggressive Share Buybacks May Jeopardize Future Earnings In Nordic Pension Market

Analysts have significantly raised Storebrand's price target from NOK 55.86 to NOK 147.50. They cite improved profit margin projections and a recent upgrade in stock outlook as key reasons for this change.

Analyst Commentary

Bullish Takeaways

Bullish analysts highlight Storebrand's upgraded profit margin projections, which support a more optimistic valuation.
The recent shift to a Buy rating reflects confidence in management execution and the company's strategic direction.
Analysts expect continued growth potential, with Storebrand's diversified offerings and resilience in changing market conditions serving as key drivers.
The substantial increase in the price target reflects positive sentiment about near-term performance improvements.

Bearish Takeaways

Some analysts express caution about the sustainability of recent earnings growth due to broader economic uncertainties.
There are concerns that execution risks could arise as Storebrand implements strategic initiatives for expansion.
Valuation remains a point of debate, with some analysts noting that expectations may now be fully reflected in the stock price.

What's in the News

Storebrand ASA has appointed Kjetil R. Krøkje (43) as the new Chief Financial Officer. Outgoing CFO Lars Aa. Løddesøl will depart after nearly 25 years on the executive team. Krøkje will officially assume the role on September 17, 2025. (Key Developments)
The company completed the repurchase of 5,845,292 shares, representing 1.35% of shares outstanding, for NOK 750 million as part of its ongoing buyback program. (Key Developments)
Both Skandinaviska Enskilda Banken AB and Danske Bank A/S have been added as Co-Lead Underwriters for Storebrand ASA's NOK 500 million Fixed-Income Offering. (Key Developments)
Storebrand recently held an Analyst/Investor Day to provide a strategic business update and announce updated financial targets. (Key Developments)

Valuation Changes

Consensus Analyst Price Target has increased substantially from NOK 55.86 to NOK 147.50.
Discount Rate has risen slightly from 6.81% to 6.96%.
Revenue Growth projection has declined further, changing from -48.12% to -54.36%.
Net Profit Margin estimate has more than doubled, increasing from 42.78% to 107.23%.
Future P/E has increased moderately from 13.34x to 15.22x.

Storebrand's Nordic presence and strategic focus on pensions and asset management drive revenue growth and market share expansion.
Digital investments and sustainability commitment potentially boost customer satisfaction, efficiency, and revenue, while share buybacks ensure shareholder returns amidst future earnings leverage risks.
Storebrand's strategic growth, sustainability leadership, and financial maneuvers strengthen its revenue potential, brand value, and shareholder returns while boosting future asset management growth.

Catalysts

About Storebrand

Provides insurance products and services in Norway, the United States, Japan, and Sweden.What are the underlying business or industry changes driving this perspective?

Expectations for significant growth are underpinned by Storebrand's strong positioning and strategic initiatives in occupational pensions and asset management in the Nordic region. This structural growth and increased market share are likely believed to continue driving revenue growth.
Increased digital investments and pursuit of a digital frontrunner status are expected to enhance customer satisfaction and operational efficiency, potentially improving both margins and earnings over time.
Storebrand's commitment to sustainability, demonstrated by being the only Norwegian company on the Global Dow Jones Sustainability Index, may drive more sustainable investment inflows, positively impacting revenue and earnings.
Large investments in share buybacks and dividends, supported by strong cash flow and operational results, indicate anticipated continuous shareholder returns, although they may also be critiqued as over-leveraging future earnings potential.
Continued expansion and growth in the retail banking and insurance sectors, along with strong cost control measures, are predicted to bolster net profit, although they may bring risks if market conditions or growth assumptions change.

Storebrand Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Storebrand's revenue will decrease by 48.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 6.8% today to 42.8% in 3 years time.
Analysts expect earnings to reach NOK 4.9 billion (and earnings per share of NOK 11.85) by about May 2028, down from NOK 5.5 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.3x on those 2028 earnings, up from 9.8x today. This future PE is greater than the current PE for the GB Insurance industry at 13.0x.
Analysts expect the number of shares outstanding to decline by 2.11% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.81%, as per the Simply Wall St company report.

Storebrand Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Storebrand has experienced strong double-digit growth across its business areas, supported by efficient cost control and successful strategic positioning. This growth trajectory could lead to increased revenue and a stable net margin in the future.
The company has executed value-accretive transactions, such as the acquisition of the Danish Infrastructure business and its own headquarters, which may positively impact earnings and cost management.
Storebrand continues to leverage its position as a leader in sustainability, being the only Norwegian company on the Global Dow Jones Sustainability Index, potentially enhancing its brand value and attracting sustainable investors, supporting revenue and earnings.
The company is increasing its dividends and engaging in substantial share buybacks, reflecting strong confidence in its cash generation capabilities and potential to improve earnings per share.
With continued structural growth in Unit Linked reserves and successful bids in public pensions, Storebrand is positioned for sustained asset under management growth, which can positively impact management fees and thus revenue and net margins.

Valuation

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

The analysts have a consensus price target of NOK131.667 for Storebrand 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 NOK150.0, and the most bearish reporting a price target of just NOK115.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK11.4 billion, earnings will come to NOK4.9 billion, and it would be trading on a PE ratio of 13.3x, assuming you use a discount rate of 6.8%.
Given the current share price of NOK124.9, the analyst price target of NOK131.67 is 5.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
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.

How well do narratives help inform your perspective?

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.

Aggressive Share Buybacks May Jeopardize Future Earnings In Nordic Pension Market