Why Cancom SE (ETR:COK) Could Be Worth Watching
6min read Cancom se (ETR:COK), a leading European IT services provider, has emerged as a stock worth watching in May 2025 amid a mix of short-term turbulence and long-term promise. While the company’s first-quarter results disappointed, its robust cash flow, strategic moves, and undervalued stock price suggest it could be primed for a rebound. Here’s why investors should pay attention.
Strong Cash Flow Hides Beneath the Surface
Cancom’s 2024 financial results were a tale of two stories: revenue surged 13.95% to €1.74 billion, driven by its IT-as-a-Service (ITaaS) segment and international expansion. Yet net earnings dipped 9.16% to €33.45 million, weighed down by one-off costs from acquisitions and operational scaling. However, the company’s operating cash flow shone, with free cash flow (FCF) hitting a record €171 million—far exceeding net profit. This disconnect highlights a key point: Cancom’s earnings may understate its financial health.
Ask Aime: "Cancom's cash flow surge hints at a coming rebound in May 2025."
The positive cash conversion (accrual ratio of -0.29) signals that the company is generating cash efficiently, even as headline profits wobble. Analysts at Simply Wall St note this metric as a mitigating factor for the Q1 earnings slump, arguing that FCF stability could underpin future resilience.
Stock Undervalued vs. Intrinsic Worth
Cancom’s shares have struggled in 2025, falling 16% to €23.56 in early May, but analysts estimate its intrinsic value at €41.54—a 76% premium to its current price. This gap suggests the market is underestimating the company’s potential.
The stock’s high beta of 1.6 indicates volatility, which could mean further dips present buying opportunities. Analysts also highlight the successful share buyback program in late 2024, where Cancom repurchased shares at €33.00, underscoring management’s confidence in the stock’s long-term value.
Growth Drivers: ITaaS and International Ambitions
Despite Q1’s 6% revenue decline to €410.4 million, Cancom remains focused on its ITaaS portfolio, which offers recurring revenue streams through cloud and managed services. International markets, particularly the UK and Austria, are critical to offsetting softness in Germany and Austria. Management reaffirmed its full-year 2025 guidance, citing “initial signs of recovery” in public-sector demand and expecting a second-half rebound.
The company’s 14.4% revenue growth in 2024 and €55.5 million EBITDA in H1 2024 demonstrate its ability to grow in cyclical markets. The challenge now is replicating this momentum in 2025.
Risks and Headwinds
- Near-Term Pressure: Q1’s margin collapse (EBITDA fell 31% to €21.1 million) reflects U.S. tariff-related SME caution, which could linger.
- Slowing Growth: Analysts project Cancom’s revenue growth to slow to 1.8% annually by 2025, below its historical 4.8% pace and the industry’s 6.4% forecast.
- Execution Risks: Delivering on the full-year guidance hinges on public-sector wins and cost discipline.
Analyst Sentiment: Hold for Now, Watch for Catalysts
While 17 analysts rate the stock cautiously, the consensus price target of €27.91 reflects optimism about a recovery. Jefferies’ Hold rating at €26.00 acknowledges the Q1 stumble but sees potential in Cancom’s 6% top-line growth and 26% EBITDA rebound for the remainder of 2025.
Conclusion: A Stock to Monitor, Not Ignore
Cancom SE presents a compelling case for investors willing to look past short-term noise. With an intrinsic value nearly double its current price, a proven cash-generating engine, and strategic moves like leadership stability (CEO Rüdiger Rath’s 2029 contract extension), the stock has room to rebound.
However, risks remain. The SME sector’s caution and slower revenue growth compared to peers could cap upside. Investors should monitor Q2 results (due May 13) and public-sector contract wins to gauge the recovery’s credibility.
For now, Cancom is a hold—but one worth watching closely. If its second-half turnaround materializes, the stock could close the valuation gap—and then some.
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The data suggests Cancom’s profit growth could outpace peers if it executes, making this a stock to keep on the radar.
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