SP Group: Valuation gap to peers persists despite recovering most of Tariff decline

SP Group’s share price as of 21/07/2025 is around -3% year-to-date, recovering most of the tariff-driven declines from April following President Trump’s tariff-driven sell-off, which saw SP Group shares fall to -23% in 2025 and similarly impacted peers Nolato and Gerresheimer.

The TACO (Trump Always Chickens Out) trade has supported the market recovery since April, with markets increasingly expecting tariff impacts to be less than initially feared. How then does this narrative fit SP Group's experience in Q2 and outlook for H2 2025 and beyond? SP Group has demonstrated a similar V-shaped recovery to peer Nolato, while Gerresheimer has underperformed with isolated company issues relating to a recent acquisition, declining organic growth, and a series of profit warnings.

SP Group’s recovery from April was boosted by solid Q1 2025 results with revenue growing 8.8% YoY, close to the upper end of stated full-year guidance (3–10%), and with EBITDA margin improvement YoY to 21.1% (from 20.5% in 2024). However, Q1 results reflected a pre-tariff world and while the initial full-year guidance for revenue growth of +3-10%, EBITDA margins of 19-21% and EBT margins of 11-13%, were cautiously maintained with the Q1 results in May, expectations have since been revised downward in connection with a H1 trading statement showing some tariff impacts had materialized in Q2.

SP Group reported a revenue decline of -10.7% in Q2 YoY as large partners delayed orders amidst global uncertainty. The revised guidance maintains EBITDA and EBT margin expectations, but reduces revenue guidance to -3% to 3%, down from 3-10%. The revised guidance suggests that the revenue decline mostly relates to partner sales, where SP Group is a sub-supplier, with its higher margin own-brand products likely less heavily impacted during this period. With uncertainty at extreme highs during Q2 due to the US fluctuating tariff policy, the question looking ahead is to what extent the delays are isolated to Q2, and how SP Group is positioned to navigate potentially raised US-EU tariffs.

Excess US factory capacity in Arizona facility

Firstly, the US is a smaller market for SP Group, with North and South America responsible for 20% of revenues in 2024, with Europe the largest market at 71%. The direct impact is therefore somewhat insulated (but still significant) while the indirect impact on EU growth may be more impactful. However, looking beneath the surface, SP Group is well positioned to navigate its tariff exposure over the medium-term, with the company’s new Arizona facility still early in its ramp-up phase, with significant spare capacity expected, even following the latest investments in production expansion.

SP Group also has production in China and across Europe, allowing it to serve clients from multiple regions. While global production capabilities are not unique to SP Group and are also seen by its peers, the company’s unused factory capacity in the US may improve its ability to move production with clients if tariffs lead to US “on-shoring”. 

The near-term outlook is less certain, however, given the broad market recovery across markets and sectors since mid-April, it is likely that uncertainty has also declined. Following H1 2025, SP Group’s revenue is -1.2% YoY vs H1 2024, with the latest guidance of -3 to 3% suggesting a more stable Q3 and Q4. Taking the mid-point management guidance, we can analyse how SP Group is valued compared to its peers under this new tariff-revised outlook.

SP Group is trading at a lower valuation to peers despite higher margins and a similar growth outlook

We can first look at a historical EV/EBITDA and P/E valuation vs Nolato and Gerresheimer, and then consider forward-looking valuation by also expanding the peer group to include Bewi and Polytec Holding.

Based on S&P Capital IQ consensus Analyst estimate data (only one analyst for SP Group), SP Group has historically traded at a lower EV/EBITDA and P/E to peers Nolato and Gerresheimer (despite SP Group’s estimates not being recalculated post trading update).

This persistent discount is not clearly justified by differences in growth expectations or historical margin profiles. As shown in the peer group table, EBIT margins and growth expectations are broadly in line with or above the peer group median, suggesting that valuation may hinge more on sentiment and perceived execution risk. Continued execution against guidance and further evidence that tariff impacts are isolated to Q2 and do not derail longer-term growth could serve as catalysts for multiple expansion.

Note*: SP Group revenue growth 2025E and EV/EBITDA 2025E reflect latest company guidance, while remaining SP Group estimates reflect unchanged analyst estimates (Analyst earnings estimates for SP Group are now assumed to be overstated based on company guidance revisions, suggesting discounts to peers will be less than stated when revised, however some discount is still likely to exist).

Over 5 years industry valuations continue declining, despite more optimistic analyst outlooks for 2026E

On a five-year horizon, the share prices of all three companies remain below their 2021 peaks, but with SP Group demonstrating clear outperformance during a turbulent period, disrupted by supply chain issues, inflation, higher interest rates, and geopolitical conflict.

Over five years, the industry valuations have been compressed from high levels seen in 2021, with EV/EBITDA around 10-12x towards lower and more stable levels of EV/EBITDA around 6-8x in 2025. Multiples have maintained a contracting trend since 2021, despite improving SP Group results in 2024, including record margins from increasing the share of own-brands. Higher interest rates are partly responsible for this move, while multiples may also reflect the cyclical downturn in production-focused companies in recent years as inflation, higher interest rates, and, most lately, tariffs add headwinds to the sector.

SP Group’s exposure to the healthcare segment, around 40% revenues, may also offer a partial explanation for compressed valuations given Trump’s latest threats for a 200% tariff on overseas-produced pharmaceutical goods. However, with a minimum of 12 months before a worst-case scenario would be implemented, SP Group likely has the flexibility through the Arizona production facility to shift production with clients should they meet Trump’s demands.

Looking Ahead: H2 2025 and Beyond

Uncertainty ahead remains elevated, with tariff uncertainty clearly delaying investment decisions in Q2 2025. While conviction in TACO and a lessened impact of tariffs are being priced into broader stock markets, the translation of higher confidence into renewed investment spending in Q3 2025 and beyond is yet to be seen. For SP Group, a return to ordering from larger clients and continued execution of the strategy to grow own-brand sales as a share of total sales are likely critical for valuation improvements. Over the medium-term, we assess a solid flexibility in SP Group’s production landscape to adjust to changes in tariffs, however, short-term uncertainty driven by the White House is less easy to navigate near-term.

However, with multiples finding a more stable level, lower interest rates in Europe, and improving tariff expectations, conviction towards a cyclical rebound in 2026, as implied by analyst estimates, may strengthen. Greater clarity on US-EU tariffs combined with lower interest rates in Europe may encourage investor confidence and margin expansion, while an adverse tariff ruling with Europe may extend multiples contraction.

Conclusion

SP Group has experienced similar volatility to much of the market in 2025, and while tariffs directly impacted Q2 2025 results over the medium to long term SP Group is at least as well positioned as its peers to react to tariffs. Despite this, the company’s valuation gap to peers persists.  However, with a strong balance sheet and exposure to structurally growing sectors like healthcare and cleantech, continued execution of the own-brand strategy and expansion in the US may be key to closing the valuation gap. For the industry to return to margin expansion, a resolution to EU-US tariff disputes may unlock confidence, especially since European interest rates have already come down.

Disclaimer: HC Andersen Capital receives payment from SP Group for a digitalIR/corporate visibility subscription agreement. / Philip Coombes 22/07/2025 21:20. Data for graphs from S&P Capital IQ.