Karnov Group (OM:KAR): Assessing Valuation After Profit Return, Margin Gains, and Strategic AI Shift

Karnov Group (OM:KAR) just released its third quarter results, showing a return to profitability and stronger margins. The company is sharpening its focus on AI-powered legal solutions after the sale of non-core operations.

See our latest analysis for Karnov Group.

After a strong run earlier this year, Karnov Group's share price has cooled a bit in recent months, sliding about 3% over the past month and nearly 9% in the last quarter. Still, the company’s total shareholder return over the past year stands at an impressive 28.6%, with even larger gains over the past three and five years. This points to steady long-term momentum as investors respond to its profitable turnaround and streamlined focus.

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With shares still trading at a discount to analyst targets and recent earnings pointing to a turnaround, investors must now consider: Is Karnov Group undervalued, or is the market already anticipating its AI-fueled growth?

Most Popular Narrative: 19.2% Undervalued

With the narrative fair value set at SEK 129 and the last close at SEK 104.2, there is a marked gap between what consensus expects and the current market price. This sets up a compelling story rooted in digital and AI-powered growth ambitions.

Successful execution of cost efficiency initiatives, targeting EUR 20 million in synergies by end-2026, is driving margin improvement and will likely bolster net margins and free cash flow conversion as restructuring charges abate. Expansion of advanced digital solutions into less-penetrated geographies (Region South) and verticals is expected to unlock new growth opportunities and diversify revenue streams, reinforcing the company's long-term earnings trajectory.

Read the complete narrative.

Curious about the assumptions behind this bullish stance? One ambitious forecast links transformative cost cuts and AI expansion to a profit margin leap and bold future earnings multiples. The precise projections driving this fair value might surprise you. Click in to get the full story and see which numbers might shape Karnov’s future.

Result: Fair Value of $129 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent slow growth in Spain and reliance on rapid AI adoption could present challenges to Karnov’s ambitious margin and revenue targets in the years ahead.

Find out about the key risks to this Karnov Group narrative.

Another Perspective: Price Multiples Signal Caution

Looking instead at the price-to-earnings ratio, Karnov Group’s shares trade at 94.5 times earnings, significantly above both the industry average of 22.6x and the peer average of 35x. That's more than double the so-called fair ratio of 38x, suggesting the market is pricing in substantial future growth. Does this raise valuation risks, or is it justified?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Karnov Group Narrative

If you have a different take on Karnov Group or enjoy diving into the numbers yourself, you can build your own story in just a few minutes. Do it your way

A great starting point for your Karnov Group research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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