Alma Media Q1'25: The pace is solid

Translation: Original published in Finnish on 04/27/2025 at 02:08 pm EEST

Alma Media reported stronger growth figures than expected for Q1, and profitability was also better than we anticipated. Based on this, we made small positive changes to our forecasts, but our earnings forecasts, which expect an upward trend in earnings development in H2'25 and the coming years, remain broadly unchanged. Against this backdrop, we reiterate our EUR 13.0 target price and Accumulate recommendation.

The pace was good in Q1

Alma Media's Q1 figures were better than we expected, as the company's 4% revenue growth was more lively than we anticipated, and the quarter's profitability was also stronger than expected and even better than in the good comparison period. The revenue overshoot came from both the Career and Marketplaces segments. Reflecting the rather high margin level of these services, it is not surprising that volume development also boosted profitability more than expected. News Media's earnings beat was, in turn, a positive surprise, even though it suffered from a slightly stronger-than-expected decline in revenue. The segment that has suffered from the contraction of print media, in Q1 once again demonstrated its ability to effectively adapt its cost structure, while its profitability improves with growing digital revenue streams.

Guidance unchanged, the lead started to build already in Q1

In its Q1 report, Alma Media reiterated its guidance for the current year, which indicates stable revenue and adjusted EBIT development compared to the previous year. Based on the company's comments, it has seen some signs of recovery in market activity towards the end of Q1, which we feel has been particularly evident in the international operations of the recruitment business, and there are also positive signs in, e.g., automotive and housing marketplaces. However, domestic advertising, which has been subdued recently, is throwing a spanner into the works. After Q1, the company’s revenue is 4% and adjusted EBIT 7% ahead of the previous year. Although these growth figures are still in line with the guidance, i.e. "at the same level", we see the possibility of the guidance being raised for 2025, provided that the operating environment continues to improve. However, considering the recent trade war events, we believe that the market recovery is still on fragile ground. Following the Q1 report, we only made minor positive revisions to our forecasts for the current and coming years, which increased by 2-3% at earnings level. The main driver behind the increase in this year's forecasts was the Q1 performance. In 2025, we expect revenue to increase by close on 5% to 327 MEUR and adjusted EBIT to rise to 80.7 MEUR. In the coming years, we expect the company to achieve reasonable organic growth of about 3% and an upward trend in profitability reflecting its scalable business.

The expected return exceeds our required return

Based on the LTM results, the adjusted P/E and EV/EBIT multiples for the stock are 17x and 14x, respectively. In our view, these valuation multiples are at a reasonable level given Alma Media's high return on capital, good cash flow generation and growth prospects. The expected return for the next few years is based on our earnings growth forecast of around 8% and a dividend yield of some 4% based on our estimates. This low double-digit expected return clearly exceeds the required return we apply and, therefore, we find the risk/reward ratio attractive. Our cash flow model at EUR 13.4 per share also supports an upside in the valuation.