AZA.ST — mttssn research

HOLD

Conviction: MEDIUM

A dominant Swedish digital savings/brokerage platform earning a 29% ROE — capital-light and growing — but fully valued at ~20× earnings (P/B understates a platform). Quality at a full price; market- and flow-sensitive. HOLD.

Return on Equity

28.9%

Cost of equity ~10.0%

Price / Book

5.86×

5.86× book (capital-light — P/E is the lens)

Fair P/B (Gordon)

4.15×

(ROE−g)/(COE−g); g 4%

Price / Target

SEK 340 → SEK 340

+0% base; HOLD

Price / Earnings

20.3×

≈20.3× earnings

P / TBV

5.92×

Price / tangible book

Economic Profit

+SEK 1,913M

+SEK 1.91B; 29% ROE, capital-light

Equity (book)

SEK 9.1B

Platform equity

Thesis

Avanza is a leading Swedish digital savings and brokerage platform, a capital-light, scale-driven franchise with a large, sticky base of savings capital, strong net inflows and a 29% return on equity. It monetises client assets via brokerage, fund and net-interest income.

For a capital-light growth platform, P/B (5.86×) overstates richness — the relevant lens is earnings: ~20× P/E for a 29%-ROE, growing platform is full but not extreme. The franchise quality is real; the valuation prices continued savings-capital and customer growth.

Valuation · residual income (equity frame) & scenarios

P/B and the Gordon formula understate a capital-light platform's value; on ~20× earnings the equity is fully valued for a 29%-ROE compounder with savings-inflow and net-interest optionality, but with no margin of safety.

Base SEK 340 (flat) on steady inflows; bull SEK 420 (strong savings inflows + higher market levels + net-interest tailwind); bear SEK 250 (a market downturn compresses asset-based revenue and trading).

Market-implied ROE

39.2%

sustainable ROE the price already demands — vs 28.9% observed

Current → Fair P/B

5.87× → 4.15×

at a sustained 28.9% ROE, K_e 10.0%, g 4%

Excess-return premium

SEK 183 / sh

value above SEK 57.96 book from the +18.9pp ROE−K_e spread

The operating reverse-DCF (NOPAT / invested capital / WACC) does not apply to a balance-sheet business — leverage is the raw material and "net debt" is not meaningful. The equity is valued on residual income: book equity plus the present value of returns above the cost of equity, discounted at K_e; the single-stage lens is the Gordon fair price-to-book, (ROE−g)/(K_e−g). The market prices in a sustainable ROE of 39.2% vs 28.9% currently earned; at a sustained 28.9% ROE the warranted P/B is 4.15× (SEK 241/sh, -29%).

Scenario	24m target	Impl. ROE	Upside	Prob.	Driver
Bull	SEK 420	47%	+24%	30%	Strong inflows + higher markets + NII tailwind
Base	SEK 340	39%	+0%	45%	Full on ~20× earnings; steady inflows
Bear	SEK 250	30%	-26%	25%	Market downturn compresses asset-based revenue
Prob-weighted	SEK 342	—	+0%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at K_e × ROE

K_e \ ROE	10%	14%	18%	22%	26%	30%	34%
8.50%	77	129	180	232	283	335	386
9.25%	66	110	155	199	243	287	331
10.00% (base)	58	97	135	174	212	251	290
10.75%	52	86	120	155	189	223	258
11.50%	46	77	108	139	170	201	232

Green = fair value above the current price of SEK 339.90. For a financial the surface is dominated by cost of equity and sustainable ROE — not unit growth.

Method & data. ROE 28.9% and book equity are observed (net income / total equity). Cost of equity 10.0% and terminal g 4% are assumptions, shown explicitly and overridable. The underwriting bridge (combined ratio → float → ROE) is [DATA SAKNAS] — it requires a financial deep-dive to extract the combined ratio and investment yield, and is omitted here rather than estimated.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Dominant digital platform

A leading Swedish savings/brokerage platform with scale and brand — the moat.

2. Capital-light, 29% ROE

An asset-light fee/spread model with exceptional returns and cash conversion.

3. Net savings inflows

Continued net new savings capital compounds the revenue base.

4. Net-interest income

Client-cash net interest adds a rate-sensitive earnings stream.

5. Cost leadership

Scale and low-cost operations support a structural cost advantage.

Key risks

Market sensitivityAsset-based and trading revenue track market levels and retail activity — the dominant swing.
Full valuation~20× earnings prices continued growth; no cushion.
Net-interest / ratesFalling rates compress client-cash net interest income.
CompetitionFee competition from neobrokers and incumbents pressures economics.
RegulationSavings/brokerage and PFOF-style regulation could affect the model.

Conclusion

Avanza is a dominant, capital-light digital savings platform earning a 29% ROE at a full ~20× earnings. HOLD, medium conviction; base target SEK 340 (flat) — accumulate on a market/flow scare.

Strong inflows plus a net-interest tailwind are the upside; market sensitivity is the principal risk.