First Read: Nordnet "11% Q2 beat: Could be enough to maintain valuation premium"

Research evidence excerpt

First Read: Nordnet "11% Q2 beat: Could be enough to maintain valuation premium"

Forecast returns

Forecast price appreciation -10.7%

Forecast dividend yield 3.0%

Forecast stock return -7.7%

Market return assumption 7.4%

Forecast excess return -15.1%

Company Description

Nordnet is a savings and investment platform operating in the four Nordic countries (Sweden,

Denmark, Norway and Finland). Nordnet's aim is to be a one-stop shop for savings and

investments by offering customer brokerage, fund, lending, insurance and pension solutions.

In recent years, net brokerage income - generated through trading/ brokerage account fees -

has been the primary income source (~60%), followed by net interest income (~25%) and

fund-related income (~15%). Sweden is Nordnet's largest market by savings capital (35%),

followed by Denmark (~25%), Finland (~20%) and Norway (~20%).

Valuation Method and Risk Statement

Our Nordnet valuation is based on a two stage discounted free cash flow model. We define

free cash flow as net income attributable to shareholders after deductions to satisfy leverage

ratio requirements. We have 10 years of active forecasts followed by a terminal period at

3.75% growth. Key risks to the upside include a much stronger equity market performance

vs. expectations which also could encourage better trading activity and platform inflows.

Risks to the downside include a pick up in pricing competition, weakening Nordic macro and

weak equity market performance, and execution risk associated with its expansion into

Germany.

Our Avanza valuation is based on a two stage discounted free cash flow model. We define

free cash flow as net income attributable to shareholders after any deductions to satisfy

leverage ratio requirements.