Sopra experienced a significant decline, with shares dropping 9% following the announcement of its new strategic plan and mid-term financial targets in preparation for its upcoming Capital Markets Day (CMD). The company outlined its financial goals for the period of 2025-2028, which aligns broadly with current market consensus.
However, the targets are at the higher end of the company's guidance for adjusted EBIT (earnings before interest and taxes) margin and free cash flow (FCF) conversion.
The key financial targets set by Sopra for its mid-term forecast include an organic growth rate of 2% to 5% per year post-2025. Additionally, the company aims to achieve an adjusted EBIT margin of between 10% and 11% by 2028. It also expects to generate free cash flow of between 5% and 7% of revenue for the same period.
Another significant objective is to generate approximately €1 billion in acquired revenue between 2024 and 2028, with the ambition of exceeding €7 billion in revenue by 2028. This would result in a total targeted average growth rate of about 6% per year.
Despite these ambitious targets, the market response was less than favorable, largely due to the adjusted EBIT margin guidance. The lower end of the margin guidance suggests there may be little to no expansion in margins between 2025 and 2028, which could be a point of concern for investors seeking growth in profitability.
"We expect the shares to underperform the market today," Morgan Stanley (NYSE:MS) analysts wrote in a note.
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