TietoEvry stock analysis: What we will go through here is what they do, finances, and see if we find any strengths, weaknesses, and what to look for in the future.
What does TietoEvry do?
So, TietoEvry is a cornerstone in Scandinavian IT, managing many of our key products, with banking being the first that comes to my mind.
They earn stable profits and have over time experienced a steady, albeit slow, growth.
They have recently acquired MentorMate, and this move is aimed at becoming a more global company and moving beyond the Scandinavian model alone.
Segments TietoEvry consists of several segments.
TietoEvry Create:
Engages in technical data, analysis, design, AI, cloud, and guidance on what can be done. This is the area where they have the highest expectations to go global.
TietoEvry Banking:
Key provider of banking services, ranging from storing customer data to card usage and transactions. Important in today's society.
TietoEvry Care:
Nordic healthcare service that directly interacts with the state and municipality. A key service that, in turn, will incur substantial costs to take over.
TietoEvry Industry:
Niche products often tailored, covering everything from logging to other industrial sectors.
TietoEvry Tech Services:
Tailors solutions for various companies, where they are adaptable and strive to provide technology that helps the specific business (for example, cloud services).
Realization of Values
The separation of TietoEvry Banking and Tech Services is progressing.
The goal for TietoEvry Banking is to become a separate company listed on the stock exchange.
The kind of values this will create for shareholders will become clearer in the future.
While Tech Services still has a way to go, it appears that this might result in a sale rather than being listed on the stock exchange.
MentorMate
Accelerates their strategy to become a global company and provides access to a customer base in the USA. It is integrated into TietoEvry Create, and the first synergies have already emerged in Q3.
A bit about finances
This specifically applies to the revenue side, as the results fluctuate quite a bit.
I view TietoEvry as a defensive haven; it's challenging to replace them, and there is likely significant value in the systems they control.
The industrial segment is so niche that it's impossible to lose it quickly.
The banking segment is probably challenging due to security reasons and the customer experience in the event of a switch.
Net Income | Operation profit | Result | EBIT Margin | Margin | |
2020 | 2786.4 | 146.7 | 94.5 | 5.26% | 3.39% |
2021 | 2823.4 | 382 | 291.6 | 13.53% | 10.33% |
2022 | 2928.1 | 266.5 | 188.6 | 9.10% | 6.44% |
2023q1-q3 | 2099.2 | 171.5 | 117.2 | 8.17% | 5.58% |
Balance
Personally, I believe that they have too high interest-bearing debt compared to operating profit. However, an interest expense of under -30 million does not currently take up too large a portion of the result. This could help improve the margin. In Q3, they have a relatively low backlog, and it will be interesting to see how this develops moving forward.
Interest-bearing debt | Debt | Equity | Assets | Backlog | |
2020 | 1168.6 | 1978.6 | 1626.2 | 3604.8 | 3350 |
2021 | 969.6 | 1766.1 | 1821.1 | 3587.2 | 3513 |
2022 | 693.5 | 1674.5 | 1719.3 | 3393.8 | 3327 |
2023q1-q3 | 1180.7 | 1926.6 | 1536 | 3462.6 | 2957 |
Cash flow
It has been a bit rough in the cash flow, with a significant decline in 2022 and 2023. It should be noted that Q4 is often one of the stronger quarters, so there could be a rebound in 2023. Their acquisition of MentorMate explains the significant investment cost and increase in debt.
Mainly, I hope we can see an improvement in this year's operations going forward.
Operations | Investment | Finance flow | Dividend | Borrowings | Leasing | |
2020 | 354.7 | -55.3 | -191.9 | -75.3 | -45.2 | -70.6 |
2021 | 367.5 | 99.8 | -398.8 | -156.3 | -165.5 | -73.1 |
2022 | 276.9 | -92 | -250.4 | -165.8 | -14.6 | -66.3 |
2023q1-q3 | 113.1 | -215.4 | -78.3 | -85.8 | 164.1 | -44.5 |
Strengths
Has significant underlying values
Defensive structure in banking and care
Positive cash flow
Good dividends
Desires growth
Weaknesses
Uncertain outcomes from Banking and Tech Services
Downward trend in cash flow
Slow growth
Unstable reports
What to keep an eye on:
What they achieve with Banking and Tech Services
If they can successfully penetrate the market in the USA
If cash flow improves in better times
If dividends remain stable
I am generally disappointed with the growth they are showing and am waiting to see what values will emerge when Bank Services, etc., receive valuations.
If you want more data or numbers you can go to the index and check out Tech there.
Feel free to check out the YouTube video I have created about TietoEvry.
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