Enento Q4'24: Swedish market sets course for this year

Translation: Original published in Finnish on 2/17/2025 at 8:03 am EET.

Enento's Q4 numbers were below our expectations, and the 2025 guidance was weak compared to our previous expectations. Regulatory changes in the Swedish credit market continue to cloud the outlook and are likely to dampen demand support from a potential recovery in the economic environment. Our estimate revisions for the next few years were negative, and with current valuations and prospects, we do not consider the stock's risk/reward to be particularly attractive. We lower our target price to EUR 17.0 (was EUR 19.0) and lower our recommendation to Reduce (was Accumulate). 

End-year performance below our forecasts

Enento's Q4 revenue decreased by 3% from the already weak comparison period to 37.8 MEUR, falling short of our 38.9 MEUR forecast. As expected, Consumer Insight continued to decline (-8%), although the magnitude of the decline surprised us. Business Insight (+1%) was more stable, but again slightly below our forecasts. However, the main reason for the weakness remains the Swedish credit market, which is undergoing structural changes in addition to the headwinds of a weak macroeconomic environment. With a weaker top-line development than we had forecast, the profit figures were also well below our forecasts, with an adjusted EBIT of 8.4 MEUR in Q4 (forecast: 9.9 MEUR), down significantly year-on-year (Q4'23: 10.5 MEUR). The gross margins in the Swedish credit information business are very high and their declining volumes have a strong impact on profitability. Non-recurring items amounted to 2.2 MEUR, and the result was burdened by a write-down of 1.6 MEUR related to the associate Goava Sales. Reported EPS were only marginally positive at EUR 0.02 (forecast: EUR 0.14).

Trends in the Swedish market set the tone for this year

Enento guided that its current year revenue will be 150-156 MEUR and adjusted EBITDA 50-55 MEUR. Guidance was weak relative to our expectations, with our previous forecasts at the high end of the range. The biggest variable for the current year is related to developments in the Swedish credit market. Here, changes will be driven by previously announced regulatory changes (including an interest rate cap) and a proposed new measure to tighten bank licensing requirements for lenders, which, if enacted, could further darken the outlook for next year. The full impact of the regulatory changes on the market and on Enento was not yet clear to the company. With regulatory changes, the changes are also structural and not just related to the economic environment. It is therefore likely that the changes will create headwinds for the Swedish market this year, even if the general economic environment picks up. We now expect Enento's revenue to grow by 1.5% to 152.6 MEUR and adjusted EBITDA to amount to 52.4 MEUR.

Risk/reward ratio not particularly attractive

Enento's adjusted EV/EBIT multiples for 2025-2026 are 13x-12x and the corresponding P/E multiples are 17x-14x. In our view, multiples for the current year are tight/neutral, as the achievement of operational earnings growth this year is still a question mark. We do not see any significant near-term drivers for the stock, especially as the regulatory changes in Sweden may dampen the recovery in the economic environment for Swedish operations. The dividend yield of around 6% is on a good level, but we think it is not enough, as last year's earnings level does not make the dividend sustainable. As the company returns to sustainable and clear earnings growth, the stock has clear upside potential at current valuations, but we believe that regulatory changes, near-term neutral valuation and lack of drivers make the stock's risk/reward unattractive at the moment.