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Baltic Classifieds Group (LSE:BCG) is among the many FTSE 250’s most spectacular performers in recent times. For a lot of traders, this Lithuanian-based digital classifieds enterprise could have flown below the radar. However the numbers, and the market’s enthusiasm, are exhausting to disregard.
An actual winner!
Three years in the past, Baltic Classifieds was valued at just below €800m. As we speak, its market cap has soared to over €2bn. This displays each fast earnings development and a re-rating of its enterprise mannequin.
Within the 12 months to April 2025, web revenue jumped 40% to €44.8m. In the meantime revenues climbed to €82.8m, up from €72.1m the earlier 12 months.
This isn’t only a story of enlargement. It’s a narrative of excessive margins and operational effectivity. EBITDA (earnings earlier than curiosity, tax, depreciation, and amortisation) margins stay effectively above 75%, and the corporate’s web debt has been nearly fully eradicated, leaving the steadiness sheet in good well being.
What units Baltic Classifieds aside is its dominant market place. The group operates main on-line portals for actual property, automotive, and job adverts throughout the Baltic area.
Just like the likes of Rightmove and Auto Dealer within the UK, these are network-effect companies, the place the largest platform attracts essentially the most patrons and sellers, making a virtuous cycle. This has allowed Baltic Classifieds to persistently develop each customers and pricing energy, at the same time as financial circumstances have fluctuated.
Worth for cash?
The forward-looking numbers are attention-grabbing. Analysts anticipate statutory earnings per share (EPS) to develop from the reported 9.3¢ in 2025 to 13.8¢ by 2027. That’s an increase of almost 50% in simply two years.
Nonetheless, the inventory isn’t low cost. Baltic Classifieds trades at a ahead price-to-earnings (P/E) ratio of 43 for 2025. This falls to 30 by 2027 as earnings rise. In the meantime, its enterprise value-to-EBITDA a number of sits close to 30, effectively above the market common.
On an adjusted degree, it’s slight cheaper. Baltic Classifieds’ adjusted EPS is forecast to rise from 13.4¢ in 2026 to fifteen.8¢ cents in 2027. That’s roughly 27.9 instances ahead earnings.
The corporate’s dividend can be forecast to extend, with the payout per share set to greater than double from 3.1¢ in 2024 to five.3¢ in 2027. With free money circulation yields rising in the direction of 4% and a payout ratio under 40%, there’s room for additional development in shareholder returns.
Traders are clearly paying a premium for the corporate’s development, margins, and near-monopoly standing in its core markets. It’s additionally value noting that the P/E-to-growth (PEG) ratio seems to sit down round 1.4 on a statutory foundation, which isn’t too demanding when contemplating margins and its aforementioned monopoly.
The underside line
There are dangers to contemplate. The Baltic economies are comparatively small and might be risky, notably if European development slows or geopolitical tensions rise. It’s additionally attention-grabbing to see a Baltic enterprise commerce at a premium whereas post-Soviet Georgian companies listed within the UK commerce with big reductions.
Competitors from international classifieds giants or new digital entrants may additionally erode the corporate’s pricing energy over time. And at these valuations, any stumble in execution or a slowdown in development may set off a pointy correction within the share value.
I’m undecided whether or not it’s the appropriate inventory for me, nonetheless. Sure, it has many spectacular traits, however the valuation doesn’t infer a lot margin for security. I believe it could be value contemplating if there’s one thing of a pullback.
