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EQS Group
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=== Valuation: DCF indicates valuation differential === The share price is 35% lower than at end FY21, dipping below the €33 price at which shares were placed in the subscription over February/March 2022. Financial software companies and global application software peers have also retrenched over the period, each by 32%. With earnings remaining subdued ahead of the anticipated whistleblowing stimulus, EV/Sales is the only realistic peer comparison metric, with EQS shares trading at valuation between the two peer groups on current year and FY2 EV/Sales. Edison Investment Research has also looked at a DCF, using a WACC of 9% (up from 8% to reflect the poorer economic backdrop) and terminal growth of 2%. Based on management’s targets of €130m of revenue and a 30%+ EBITDA margin for FY25e, with revenue growth tailing off thereafter as the effects of scale take effect, the implied share price is €47.66. There is obviously an element of execution risk here. Even if the EBITDA margin were to be set at 25%, the implied share price would be €37.88, 29% above the current level.
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