Forbo Holding's ROE Lags Behind Industry Growth Despite Decent Fundamentals

Forbo Holding AG's stock has declined 15% in the last month, but its fundamentals look decent. The company's return on equity (ROE) is 13%, which is higher than the industry average. However, its net income has declined by 7.6%, and the company pays out a significant portion of its earnings as dividends. Despite this, the company's earnings have been shrinking at a slower rate than its industry, offering some relief to shareholders.

Q.Beyond AG (FRA:QBY) reported a robust set of financial results for the second quarter of 2025, showcasing significant improvements in key financial metrics despite facing several challenges. The company's earnings call highlighted a 23% increase in EBITDA, a notable achievement in operational performance [1].

The company's net income reached break-even, marking a significant milestone towards profitability. This performance was bolstered by a 22% improvement in managed services margin and a 155% increase in gross margin in the consulting segment, which now contributes 33% of total revenue. The equity ratio has improved to 68%, indicating a robust balance sheet and financial stability [1].

Q.Beyond AG also reported nearly 40 million in net liquidity, equating to 0.32 per share, providing flexibility for potential mergers and acquisitions (M&A), dividends, or share buybacks. Recurring revenues, at approximately 70% of total revenue, further support the company's financial health [1].

However, the company faced several challenges. Revenue growth was limited, with a loss of about 3 to 4 million every quarter due to a focus on profitable solutions. Data center usage rates have not met expectations, and the company may face liquidity constraints due to expected tax payments by the end of the year. The macroeconomic environment remains challenging, potentially impacting future growth and profitability [1].

The company's CEO, Thies Rixen, attributed the strong growth in the consulting segment to effective sales strategies and the right skills in place. He expects this growth to continue as digitalization and AI adoption increase. Rixen also outlined the company's M&A strategy, targeting companies with over 10 million in turnover and a 10% EBITDA margin, focusing on those with expertise in energy and healthcare. The company aims to close a deal this year [1].

Looking ahead, Q.Beyond AG is optimistic about its performance in the second half of 2025. The company expects initial signings for its private enterprise AI platform in Q3, positioning itself to provide both consulting and managed services in the long term. The CFO, Nora Wolters, indicated that the company aims to pay dividends or conduct share buybacks after achieving a positive net income by the end of 2025, potentially starting in 2026 [1].

Despite the challenges, Q.Beyond AG's strong financial performance and strategic outlook suggest that the company is well-positioned to navigate the current market conditions and continue its growth trajectory.

References:
[1] https://finance.yahoo.com/news/q-beyond-ag-fra-qby-230029912.html