Talenom - Realizing further growth potential

Organic growth supplemented by acquisitions
Talenom has in the past years focused clearly on organic growth and achieved double-digit growth figures in doing so. With favourable conditions for acquisitions Talenom is now clearly seeking to supplement the organic growth, which has slowed down slightly due to the pandemic, with inorganic growth. With the acquisitions made so far during 2021 we expect growth of 25.2% y/y and a sales CAGR of 16% during 2020-2023E, not including any likely new acquisitions.

Healthy margins but M&A limits near-term upside
Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through digitalization and automation of bookkeeping tasks and processes the company has been able to better allocate personnel resources, resulting in sizeable improvements in margins. We expect further development to be limited in the near-term due to the increased M&A activity, with the typically lower margins of acquirees and integration costs burdening profitability. Likely future efficiency improvements and thus profitability should also be of smaller magnitude, with a larger share of actions already taken.

HOLD with a target price of EUR 13.3 (12.0)
We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0). Our target price values Talenom at 50x 2021E P/E. Valuation is certainly not on the cheaper side but the multi-year track of rapid growth and profitability improvement along with the very defensive nature of the business and pick-up in M&A activity in our view justify the high valuation.