Translation: Original published in Finnish on 02/20/2026 at 07:39 am EET

Source: Inderes

We raise our recommendation for Lemonsoft to Buy (was Accumulate) and revise our target price to EUR 6.5 (was EUR 7.1) The company's Q4 earnings were in line with our expectations, and the outlook for this year anticipates continued earnings growth, as we expected. In our view, the sell-off in SaaS companies and AI fears have pushed Lemonsoft's valuation (2026e EV/EBIT 11x) to an attractive level. We currently consider the AI threat of ERP providers for SMEs to be quite low, and, thus, we see the current panic as an entry point.

Q4 earnings met our expectations

Lemonsoft's Q4 revenue decreased by 3.5% to 7.4 MEUR, which slightly exceeded our estimate of 7.2 MEUR. SaaS revenue, which is most important for strategy and value creation, (Q4’25: 5.6 MEUR) grew by 2% when we expected stable development. Transaction income (Q4’25: 0.75 MEUR, -12 %) and consulting revenue (Q4’25: 1.1 MEUR, -20%) decreased slightly less than we expected. Adjusted EBIT was 1.5 MEUR in Q4 (Q4'24: 1.5 MEUR), and fully met our expectations. Due to cost savings, the adjusted EBIT margin (20.6%) improved slightly year-on-year (19.6%) despite the decline in revenue Lemonsoft's cash flow from operating activities (Q4’25: 3.1 MEUR) was strong and full-year free cash flow (7.4 MEUR) was excellent.

No surprises in the 2026 outlook

Lemonsoft is guiding for revenue growth of 5-13% for this year, and for adjusted EBIT to be 23-29% of revenue. According to the company, the market situation remains uncertain, but small signs of recovery are already visible. We estimate that the Jakamo acquisition will bring around 6% inorganic growth this year. Overall, the outlook was largely in line with our expectations. We added the acquisition to our estimates and, at the same time, slightly revised our organic earnings growth expectations downwards. Overall, revenue estimates for the next few years rose by 7%, and earnings estimates (+-2%) remained almost unchanged. We now estimate 7% revenue growth and an adjusted EBIT of 26.6% for this year.

The threat of AI currently seems overblown

We are not particularly concerned about the threats posed by AI to Lemonsoft at the moment, as the SaaS transformation in the SME ERP market has taken a very long time. Existing SaaS providers can also leverage new AI tools to develop new value-added features based on customer data. At best, this can only improve customer retention. Entering the SME ERP market is also expensive for new players, as the average billing per customer is quite low, while sales cycles can be relatively long and require significant investment. Lemonsoft stated in its earnings call that competition will certainly intensify at some point due to AI, but no new players are yet visible in the market. There is also a risk of price pressure in the long run. This can be partly addressed by significantly accelerating product development cycles, allowing new value-adding features to be delivered to customers faster than before.

Valuation has fallen to a low level

Based on our forecasts, Lemonsoft's EV/EBIT ratio, adjusted for PPA amortization from acquisitions, is 11x in 2026. We believe the valuation has fallen to a low level, and Lemonsoft's share no longer prices in significant growth expectations. If the market starts to pick up and the earnings growth that we forecast materializes, the valuation looks very low for the coming years (2027e-2028e EV/EBIT 9.6x-8.5x). A key challenge for Lemonsoft's valuation increase in the short term is the generally weak sentiment for SaaS stocks. If the company can deliver its targeted earnings growth in the coming years, we estimate that investors' concerns will eventually dissipate, and the valuation will return to a higher level than at present.