Enento Q1'25: Return to growth

Translation: Original published in Finnish on 04/28/2025 at 07:30 am EEST

Enento's growth and operating profitability in Q1 slightly exceeded our estimates, although large non-recurring items depressed reported figures. Regulatory changes in Sweden have not caused additional headwinds, and the outlook has stabilized somewhat. A major recovery is not yet expected this year due to the high economic uncertainty, but the market bottom may be behind as the company turns to growth after a two-year downward trend. The share valuation is not exactly cheap at this year's earnings level, but if the company slowly returns to a path of earnings growth, we think it is worth staying on board at this turning point. We raise our target price to EUR 17.5 (was EUR 16.5) and reiterate our Accumulate recommendation.

Q1 development mainly exceeded our expectations

Enento’s Q1 revenue grew by 1% to 37.7 MEUR, which exceeded our estimate expecting stable revenue. By business area, the development trends were largely in line with our expectations, with Consumer Insight’s revenue still falling slightly (-1.5%) and Business Insight growing (2.9%). Growth in the latter is supported by, e.g., new product launches, and the company mentioned that growth in compliance services has been strong. By country, the company grew everywhere except in Sweden, and in Finland, it grew by as much as 5%. Enento’s adjusted EBIT was largely at the level of the comparison period (EUR 9.5 MEUR vs. Q1'24: 9.4 MEUR), which was better than our and consensus expectations. The company has thus been quite successful in its operational efficiency improvements, although, e.g., material procurement costs still cause headwind to profitability. Non-recurring items, on the other hand, were higher than we predicted (should decrease in H2 as IT infrastructure projects end), and financing costs were up due to non-cash flow impacting FX losses. The reported EPS was EUR 0.09, which was below our forecast of EUR 0.13.

Regulatory changes have no longer weakened the outlook

As expected, Enento reiterated its guidance for revenue of 150-156 MEUR and adjusted EBITDA of 50-55 MEUR. There was no greater drama in the outlook. The company has not seen any significant changes in the market in Sweden due to the regulation to prevent over-indebtedness that came into force at the beginning of March. We feel this is positive, as the risks of a continued market meltdown do not appear to be materializing, at least in the current situation. Stabilization has also been detected in the outlook for consumer credit information services in general, although no major recovery is in sight. The outlook for business information services is better, as numerous product areas are growing (e.g. compliance and real estate information services). The uncertainty in the economy caused by the trade war naturally increases the risks related to how the macro situation develops, but so far, the company has not seen this concretely affecting the behavior of its customers.

We remain on board with the stock as the business stabilizes

Enento's adjusted EV/EBIT multiples for 2025-2026 are 13x-12x and the corresponding P/E multiples are 18x-14x. This year's multiples are not yet particularly attractive, but EPS is still depressed by significant non-recurring items in the first half of the year (not adjusted in the P/E ratio in our current model), and these should decrease towards the end of the year. In our opinion, Enento's Q1 report showed that the clear downward trend in revenue (and earnings) has now reversed. As the company returns to an earnings growth path, we believe it is worth staying on board despite the rather tight short-term valuation. The risk, of course, is that the uncertain economic environment caused by the trade war will prolong the recession in Finland and Sweden, which could make a turnaround difficult. However, we still find the risk/reward ratio interesting with the current valuation.