Nemetschek Is Too Expensive Again: Valuation vs. Reality in Construction Tech
45min read The stock of Nemetschek se (FRA:NEM) has surged 46% over the past year, fueled by strong growth in its software-as-a-service (SaaS) segments and strategic acquisitions. Yet investors are now asking: Is this construction tech giant’s valuation outpacing its fundamentals?
At a recent price of €122.50 (as of May 5, 2025), Nemetschek’s shares now trade at 79x trailing earnings and a 50x EV/EBITDA multiple, levels that even its rapid revenue growth—26% year-on-year in Q1 2025—strains to justify.
The Growth Story, in Numbers
Nemetschek’s rise is rooted in its transition to recurring revenue models. Its Annual Recurring Revenue (ARR) hit €1.038 billion in Q1, up 39.6% year-on-year, driven by SaaS products like Bluebeam and GoCanvas. The Build segment, which caters to construction professionals, saw revenue jump 66%, while its Design segment (architectural software) grew 12%, though margins here were pressured by transition costs and a one-off loss from a payment provider’s collapse.
The company reaffirmed its 2025 targets: 17–19% revenue growth and a 31% EBITDA margin. Yet the question remains: Can these metrics support its current valuation?
Valuation: A Sky-High Multiple, Questionable Fundamentals
Let’s break down the numbers:
- Profitability Multiples
- Trailing P/E of 79: This is nearly triple the sector average. Even with a projected 20% earnings growth rate, the PEG ratio of 2.73 suggests the stock is overvalued relative to its growth.
Forward P/E of 56.6: Still sky-high, even if earnings materialize.
Enterprise Value Metrics
- EV/EBITDA of 50.17 (April 2025) and 44.55 (May 2025): The May drop reflects updated EBITDA estimates, but neither multiple is cheap. For context, Autodesk trades at ~25x EV/EBITDA.
EV/Sales of 13.58: A stark contrast to peers like Trimble (6.3x) or Hexagon (8.7x).
Cash Flow and Dividends
- FCF Yield of 2.49%: A meager return for investors.
- Dividend yield of 0.45%: Minimal reward for holding the stock long-term.
Risks Lurking Beneath the Surface
While Nemetschek’s SaaS pivot is impressive, several red flags emerge:
- Margin Pressures: The Design segment’s EBITDA fell 13% in Q1 due to transition costs and one-off losses. Even with synergies from GoCanvas, margin expansion could lag.
- Debt and Cash Flow: Net cash remains negative at -€248.5 million, and while FCF is strong (€349.8 million TTM), it’s insufficient to offset valuation concerns.
- Geopolitical Risks: Slowing construction sectors in Europe and North America—driven by interest rate hikes and geopolitical tensions—could delay software adoption.
Analysts Are Skeptical
The consensus “HOLD” rating with a €111.80 price target (below current levels) reflects this skepticism. Even bulls acknowledge the stock is pricey:
> “Nemetschek’s valuation assumes flawless execution of its SaaS transition and zero margin headwinds. Those are big asks.”
> — Equity Analyst Report, April 2025
Conclusion: Growth vs. Value
Nemetschek’s €14.3 billion enterprise value demands nothing short of perfection to justify its multiples. While its SaaS growth is real—83% YoY in subscription revenue—the stock’s valuation now requires investors to bet on a near-perfect future:
- Revenue growth must stay above 19% annually for years.
- Margin pressures in legacy segments must reverse.
- The macroeconomic environment must stay favorable for construction tech spending.
The risks here are asymmetric. A stumble in any of these areas could lead to a sharp revaluation. For now, Nemetschek is a high-beta bet on construction tech’s future—and one that looks overpriced for all but the most aggressive investors.
Final Take: While Nemetschek’s SaaS pivot is commendable, its current valuation leaves little room for error. Investors may want to wait for a correction before jumping in.
