Translation: Original published in Finnish on 3/6/2026 at 8:38 am EET.

Solwers' Q4 was weaker than our expectations, and the earnings growth we had forecast did not materialize, with EBITA remaining at the subdued level of the comparison period. Commentary on the development at the beginning of the year also fell short of our expectations. We lowered the slope of our earnings growth forecast for the coming years, which means the valuation is no longer particularly attractive. We lower our target price to EUR 2.1 (from EUR 2.5) and our recommendation to Reduce (was Accumulate).

Year-end development was weaker than we expected

Contrary to our expectations, Solwers' Q4 revenue declined by almost 5%, whereas we had anticipated a continuation of the over 6% growth seen in the early part of the year. About half of the undershoot was explained by changes made to reporting practices, but even adjusted for this, the quarter's sales were softer than we expected. The company's EBITA (1.0 MEUR) remained close to the comparison period but was below our forecast of 1.4 MEUR, which had anticipated earnings growth.

Based on comments, market pricing pressures continued, eroding margins, even though the company had managed to increase its utilization rates in line with our expectations. On the positive side, the company commented that the order book continued to increase, and it still appears that going forward, the workload relative to personnel is in a better balance than in the comparison period. Of course, the total order book does not directly reflect the situation of different subsidiaries, as some may have a long order book and some businesses may have only a small one.

Earnings trend has been stabilized, yet earnings growth needed

The stabilized earnings development achieved in H2’25 was the first step towards improving earnings, which is needed to leave cash flow for owners even after paying financing costs. The company's net debt/EBITDA ratio, which had risen high to 4x (LTM), surprisingly improved slightly in Q4. This was due to strong cash flow at the end of the year and the fact that the December acquisitions were made at favorable valuations. By summer, the company should already be at a normal covenant level (below 3.5x), and this requires earnings growth. The company guided for EBITA profitability to strengthen in 2026 but also stated that the year has started in challenging conditions and that performance is expected to improve as the year progresses.

We have pushed back our earnings growth expectations

We still expect earnings growth in 2026 but anticipate it to be more gradual than before and to materialize mainly in H2'26. We expect the company's utilization rates to improve first as a result of its own actions, after which margins will also begin to recover as market price levels become linked to increased investment activity. Currently, the key question remains what the company's normal profitability level will be once the market finally improves. In our opinion, it is clear that it is significantly better than the 2025 level (EBIT 1%), which is burdened by a weak cycle and one-off costs, but a return to the 2019-2023 averages (EBIT ~8%) currently seems unlikely. Our long-term profitability forecasts are now at 6.7%.

Valuation multiples for the next 12 months are very high

Solwers' risk profile is dependent on its normal profitability level, as the company's debt servicing capacity and thus the debt-related risk level depend on the earnings level. Cutting a few corners, if the profitability level were to remain close to the levels seen in 2024-2025, the share would be expensive, the M&A strategy would have failed, and the debt burden would be a challenge. Conversely, if profitability recovers to the level of our forecasts, the stock's valuation is already quite attractive when looking further out, the debt level is under control, and new acquisitions can again be considered. With the lowered 2026-2027 forecasts, the valuation (EV/EBIT 19x and 12x, and P/E 32x and 11x) no longer looks particularly attractive, and we will monitor for signs of a pick-up in earnings growth, which is critical for the investment case.