Alma Media Q3'25: Earnings growth expected to accelerate in coming years

Translation: Original published in Finnish on 11/03/2025 at 08:30 am EET

Alma Media's Q3 figures were slightly below our estimates, which had risen due to the recent guidance upgrade. There were no surprises, and the slightly softer earnings growth than we expected was due to several factors. Thus, our estimated earnings growth outlook, based on a more favorable market situation in the coming years, has remained largely unchanged, and our estimate changes were marginal. We reiterate our Reduce recommendation and EUR 15.5 target price for Alma Media's stock, which we view as fairly priced.

The earnings estimate undershoot consisted of small streams

Alma Media’s Q3 revenue grew by almost 6% from the comparison period to just over 79 MEUR. As expected, the Marketplaces segment was the growth driver, benefiting from both organic growth and acquisitions. Organic revenue growth is driven by a slight pick-up in the used car and old housing markets in Finland, as well as Alma Media's strong competitiveness in the Swedish commercial property market, where it is gaining market share. Atypically for the company, its costs grew faster than the top line in Q3, as a result of which adjusted EBIT came in at 22.7 MEUR, below our estimate. However, the profitability level is very good for the company, and there is no drama behind the cost development.

At the borderline of the guidance

Alma Media recently upgraded its guidance for the current year ahead of the Q3 report and expects its 2025 revenue and adjusted EBIT to be at the previous year's level or to grow. In our view, the raised guidance was driven by slightly stronger-than-expected performance in the marketplace businesses, where the organic growth drivers seen in Q3 also provided more tailwind than expected. In addition, the company's own cost efficiency and several small growth initiatives have been a positive surprise. We made minor downward revisions (1-2%) to our earnings estimates for this and coming years, and our estimated revenue growth of just under 5% and adjusted EBIT growth of close to 7% for 2025 are, in our view, at the borderline of the current guidance (i.e., at the previous year's level or barely growing).

Market tailwinds and accelerating earnings growth in the coming years

We estimate Alma Media's (organic) growth in 2026-2027 will accelerate from this year's level, as our estimates rely on the assumption of a stronger economic environment. As economic growth picks up, we expect growth in consumer-driven marketplaces to accelerate and corporate recruitments to strengthen Career's growth Further, in News Media, we expect the development of advertising revenue to pick up. In line with high-margin revenue growth, we expect the company's earnings to grow with leverage relative to top-line development. In addition, earnings growth will be aided by lower costs in Career, in line with the timing of development projects. Thus, we estimate revenue growth for 2026-2027 to reach 3-5% and operational earnings growth to average 8%.

Earnings growth will be absorbed by valuation multiples

Based on the LTM results, the adjusted P/E and EV/EBIT multiples for the stock are around 21x and 17x. In our view, even considering Alma Media's high return on capital, good cash flow generation, and growth outlook, these valuation multiples are high. Thus, our estimated strong earnings growth in the coming years (2025-2027 EPS growth 10%) is partly offset by the digestion of valuation multiples, and this, together with an average dividend yield of just over 3% in the coming years, does not raise the expected return above the required return. The neutral valuation picture is also supported by our cash flow model, which is at our target price level. We are therefore holding out for better entry points into Alma Media's earnings growth story.