Translation: Original published in Finnish on 2/5/2025 at 8:00 pm EET.

Alma Media’s expectedly good Q4 figures sealed a rather successful year 2024, considering the circumstances. The company's stable guidance for 2025 met our expectations and the new financial target, which indicates significant profitability improvement over the medium term, was a positive surprise. We have fine-tuned our near-term forecasts while raising our longer-term forecasts. In view of this and the slightly lower required return, we are raising our price target to EUR 13.00 (was EUR 11.0) and our recommendation to Accumulate (was Reduce).

The Q4 figures were very much in line with expectations

Overall, Alma Media's Q4 results were in line with our expectations. The company’s revenue grew 4% year-on-year, which was well in line with our 5% growth forecast. Growth was driven by an expected factor, namely inorganic growth in the Marketplaces segment, while organic growth was tighter than expected, reflecting the investment outlook for consumer durables and the advertising and recruitment markets. With slightly better profitability than we had forecast, Alma Media achieved an EBIT margin of 24% and an adjusted EBIT of 19.5 MEUR in Q4, slightly above our forecast. Overall, Q4 and 2024 were a continuation of Alma Media's solid profitability performance based on tight cost discipline and a change in revenue structure in the weak operating environment of recent years.

Profitability target raised

The big news of the earnings day was the updated financial targets, as the company raised its long-term profitability target to above 30% (previously above 25%). The company reiterated its target of over 5% growth and below 2.5x net debt / EBITDA. The profitability target is set to be achieved in three years and is based, in addition to the already seen and continuing change in revenue structure, on the margin potential of higher value-added products based on product development. We recognize this potential, but at the same time it should be remembered that realizing it requires faster revenue growth than seen so far. This, in turn, requires stronger overall economic development.

Positive forecast changes for the longer term

Alma Media issued a guidance for 2025 according to which its revenue (2024: 313 MEUR) and adjusted EBIT (2024: 76.9 MEUR) are estimated to be at the 2024 level. We believe this language is consistent with our moderate earnings growth projections, and we have made only minor refinements to our 2025-2026 projections. However, based on the solid profitability performance of recent years and the growth prospects of the company’s highly profitable businesses, we have raised our medium- and long-term forecasts. However, our margin projections for 2027-2028 (26.1% and 26.8%) are moderate relative to the financial target.

Expected return barely pushes above expected return

Based on the LTM results, the adjusted P/E and EV/EBIT multiples for the stock are 17x and 14x, respectively. In our view, these valuation multiples are at a reasonable level given Alma Media's high return on capital, good cash flow generation and growth prospects. Thus, the return expectation is based on the combination of our earnings growth forecast and the dividend, which we estimate will push it slightly above our calculated required rate of return. Our updated DCF model (EUR 13.4 / share) is also a sign of upside.