The recent downturn has taken Evolution AB shares close to a medium term support level around 878.2 SEK. The timing for a long trade in the stock appears good.
Summary
● The company has strong fundamentals. More than 70% of companies have a lower mix of growth, profitability, debt and visibility.
● From a short-term investment perspective, the company presents a deteriorated fundamental situation
Strengths
● The prospective high growth for the next fiscal years is among the main assets of the company
● The company's earnings per share (EPS) are expected to grow significantly over the next few years according to the consensus of analysts covering the stock.
● Before interest, taxes, depreciation and amortization, the company's margins are particularly high.
● The group's activity appears highly profitable thanks to its outperforming net margins.
● Thanks to a sound financial situation, the firm has significant leeway for investment.
● The difference between current prices and the average target price is rather important and implies a significant appreciation potential for the stock.
● Consensus analysts have strongly revised their opinion of the company over the past 12 months.
● Historically, the company has been releasing figures that are above expectations.
Weaknesses
● With an expected P/E ratio at 359.43 and 270.03 respectively for both the current and next fiscal years, the company operates with high earnings multiples.
● The company's "enterprise value to sales" ratio is among the highest in the world.
● The company appears highly valued given the size of its balance sheet.
● The valuation of the company is particularly high given the cash flows generated by its activity.
● Over the past four months, analysts' average price target has been revised downwards significantly.
● The price targets of various analysts who make up the consensus differ significantly. This reflects different assessments and/or a difficulty in valuing the company.
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Evolution AB specializes in the development, publishing and marketing of live casino games on the Internet for gaming operators. The group operates in the fields of roulette, blackjack, baccarat and poker games, while offering software solutions and online casino platforms live on computers, smartphones and tablets.
At the end of 2022, Evolution AB had 11 production studios located in the United States (3), Belgium, Canada, Georgia, Latvia, Lithuania, Malta, Romania and Spain.
Net sales are distributed geographically as follows: Sweden (0.1%), Malta (67.5%), Australia (3.3%), Curaçao (21.8%), North America (0.6%) and others (6.7%).