After starting its journey as a listed company with one soft and one weak quarter, CombinedX’s Q4 report shows what the company is capable of. Organic growth was 16.5%, and the adjusted EBIT margin amounted to 11.2%. While high license/product sales and a high share of sub-consultants contributed to the strong sales, low employee churn and high utilization rates were the key drivers behind the solid numbers.

Following two quarters of high employee churn, negatively impacting growth and margins, the churn returned to normal in Q4. Several factors helped reduce employee churn. First, the pent-up demand for switching employers following Covid-19 is likely gone. Second, post-Covid, CombinedX has been able to arrange group-wide activities, strengthening the corporate culture. Third, as the supply of consultants increases and the number of available deals declines, changing employers has become riskier.

We raise our Base Case to SEK60 (52) due to raised forecasts and as our confidence in CombinedX’s profit generation ability has increased. Despite the recent surge in the share price, CombinedX is trading at 5x EBITDA 2023e. While we do not want to extrapolate one solid Q4 too much, we believe the risk/reward in CombinedX has improved following the report.