Translation: Original published in Finnish on 9/5/2025 at 8:00 am EEST.

Enento's share price has continued to decline significantly following its weak Q2 results. The economic development in Enento's target markets has remained subdued, and we do not see any significant changes in the short-term outlook. With the share price having dropped, the valuation multiples for the coming years are already moderate (adj. P/E 13x), even though investors bear the risk related to the realization of earnings growth. In any case, we believe the risk/reward ratio is already becoming attractive at the current valuation. We reiterate our EUR 17.0 target price but raise our recommendation to Accumulate (was Reduce). 

This year is likely to remain weak in terms of earnings

Enento has had a challenging few years, as rising interest rates and structural changes in the consumer credit information market have weakened demand for consumer credit information services, particularly in Sweden. It also appears that the current year will be weak in terms of earnings, although our forecasts indicate that earnings will practically not decline further. The weakness is still due to the changes in the Swedish market and the generally weak economic environment in the company's main operating countries (Finland and Sweden). A return to earnings growth would require clearer top-line growth, as changes in revenue strongly impact profitability due to the company's high gross margins and largely fixed cost structure. Q1’25 already showed cautious signs of improvement, as the company returned to growth after two years. After that, Q2 was again a disappointment (revenue declined on a comparable basis), indicating that the recovery slope is, at best, gentle.

Financial targets not realistic in the coming years

This was also communicated by the company's updated financial targets in connection with Q2 (average revenue growth of 5-10%, adjusted EBITDA margin of 40%, and net debt to adjusted EBITDA below 3x). The targets remain the same, but the target period was removed as the company expects it will take longer than previously anticipated to achieve them. Regarding growth, we believe the company can reach its target in at least a single year once demand recovers, but the target is challenging for an average growth rate. Regarding profitability, the target is very challenging, as our forecast for this year is an adjusted EBITDA of 34%. The target would require highly profitable growth and a larger scale. The leverage target is realistic, but with recent earnings performance and dividend payout levels (the company has not wanted to cut the dividend), leverage has increased and is close to the upper limit of the target (Q2’25: 2.9x).

This year, we expect revenue to grow by 2% to 153 MEUR, with the adjusted EBITDA at 51.7 MEUR. Thus, we expect the company to reach its guidance (revenue 150-156 MEUR & adjusted EBITDA 50-55 MEUR), but if the operating environment continues to weaken in the rest of the year, a negative profit warning would not be entirely ruled out.

Valuation is moderate as the company returns to earnings growth

Our adjusted EV/EBIT ratios for 2025-2026 are slightly below 13x-12x, with corresponding P/E ratios of 18x-13x. This year's multiples are not yet particularly attractive, but EPS is still burdened by significant non-recurring items in the first half of the year (not adjusted in the P/E ratio), which should decrease in H2. We believe next year's multiples are already moderate. However, these require the realization of the moderate earnings growth we anticipate, which would be supported by an upturn in the Finnish and Swedish economies and the stabilization of the Swedish credit information market. Once the company returns to earnings growth, we believe there is clear upside potential in the stock. Visibility on this is still dim, but at the current valuation, we believe the risk/reward ratio is becoming attractive. While awaiting a clearer recovery, investors receive a solid dividend yield of over 6%. In addition to external factors, much also depends on the company's own actions and how it succeeds in commercializing and growing its new product areas.