Nagarro SE – Technology and IT Consulting Specialist

Brief Summary for Investors: Nagarro is a global provider of digital and IT consulting services with a focus on digital product development, AI, cloud, and e-commerce. The company benefits from the long-term growth trends of digitalization.

Development The share price showed strong upward momentum from 2020 to the beginning of 2022 (from approximately €83 to over €200), driven by an expansive phase with strong revenue and profit growth, as well as the general technology euphoria. Since then, the share price has corrected significantly and is at a multi-year low (approximately €51), reflecting the changed market conditions, rising interest rates, and consolidation following the growth phase. Despite continued revenue growth (last quarter: €252 million), the financial performance shows profit under pressure (net profit fell from €12.7 million in Q3/24 to €8.3 million in the most recent quarter) and negative free cash flow, indicating margin pressure and potential investments.

Opportunities: The strong position in promising areas such as AI, cloud, and IoT offers significant growth potential. The global presence diversifies regional risk. The sustained demand for digitalization projects across all economic sectors provides a stable long-term foundation.

Risks: The high level of debt (debt-to-equity of 3.73) represents a significant financial risk, especially in a higher interest rate environment. Recent developments demonstrate margin pressure and volatile profitability. An economic downturn could curb customers' willingness to invest in IT projects and directly impact demand.

Additional Notes: The profitability metrics (ROA: 1.1%, ROE: 5.4%) are currently weak. The company employs 18,000 people, which presents significant operating leverage potential but also presents cost risk in times of weak demand.

Conclusion: Nagarro operates in a structurally growing market, but is currently showing clear signs of difficulty maintaining its strong historical profitability in the face of growth and high debt. The current valuation already reflects these challenges. Stabilizing margins and improving cash generation are crucial for a turnaround.

Read full AI analysis