The demand for e-commerce and IT services is currently very strong. Given Avensia’s Q3’21 LTM sales growth of 15% y-o-y, the company has already started to benefit from this, and we expect this to continue in 2022, when we forecast 22% sales growth (vs. Sweden’s total IT budget growth of 4.5%, according to Radar). With demand particularly strong, we see availability of consultants (supply) as the main bottleneck holding back sales growth. That said, Avensia’s decision to maintain a high net recruitment rate during the pandemic (its headcount has grown by 33% since Q1’21) has provided it with a strong supply.
‘22e EV/EBIT of 14x in line with peers, despite higher growth
The share is trading at 14.0x ‘22e EV/EBIT, about 3% above its 3-year historical forward 12-month EV/EBIT of 13.6x but below peers at 14.8x. That said, we expect Avensia to outperform peers on both sales and EBIT CAGRs in the coming years. We think that one big investor concern has been its high margin volatility (due to the short-term negative correlation between margins and headcount growth). However, we expect this volatility to decrease as the company grows in size.
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