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Founded 2000 Reporting EUR Synthetic credit A3/A- Valuation date 2026-05-25 Industry Computer Services MC 1,000 iterations FCFF · Dark v3

Compounder mis-priced by governance wrapper · +39.6% margin of safety

Market at P5 of MC distribution

With the council's full haircut suite — 7.5% year-10 EBIT margin (industry median), sales-to-capital 2.5 (roll-up goodwill drag), 20% governance discount — intrinsic per-share lands at €53.24 vs market €32.15. β triangulated to 5Y regression 0.90 (vs sector-median re-levered 1.20) → WACC 5.73%. The €34.50 P5 outcome still sits above today's market price: P(undervalued) = 97.5% across 1,000 MC iterations.

SectorComputer ServicesGeoUK 25.6% · CH 23.8% · BeLux 13%MC σ€10.65/shGovernanceMottard family 17.9% · 20% haircutROIC14–20% TTMCoverage2 analysts · Oddo €43 / TP ICAP €47

Intrinsic / share

€53.24

post 20% gov haircut (€66.55 → €53.24)

Market / share

€32.15

SWP · Euronext Paris · €385k ADV

Margin of safety

+39.6%

vs intrinsic

Enterprise value

€675M

79.3% terminal

Cost of equity / debt

6.83% / 2.45%

β 0.90 · CRP 0.70%

Terminal ROIC / g

14.00% / 2.40%

ROC 14.0% vs WACC 5.73%

What it sells, where it sells

Operating segments

UK & USNorth Sea O&G + financial services · EBITDA 14.2% 30.1%

BeNeLux / EU institutionsPublic sector + Brussels EU bodies · EBITDA 9.1% 34.4%

Switzerland & CanadaFinancial/pharma consulting · EBITDA 13.4% 29.7%

Offshore & Middle EastTunisia/Morocco nearshore + UAE/KSA/Qatar · EBITDA 29.6% 5.8%

Offshore & Middle East (5.8% of revenue) generates ~17% of EBIT at 29.6% EBITDA — the segment-mix debate is really a UK O&G customer-concentration debate, not a margin debate: if North Sea spend cuts hit the 30%-revenue UK cluster, no amount of Offshore margin improvement offsets the revenue drag.

Country mix (revenue-weighted CRP input)

🇬🇧 United Kingdom 25.6%

🇨🇭 Switzerland 23.8%

🇧🇪 Belgium 10.3%

🇨🇦 Canada 5.9%

🇳🇱 Netherlands 5.2%

🇫🇷 France 5.2%

🇩🇪 Germany 5.2%

🇺🇸 United States 4.5%

🌍 North Africa + Gulf ~5.0%

UK + Switzerland + Belgium = 59.7% of revenue — a Northern-European concentration that keeps blended CRP low (~0.70%) but means a UK Energy capex cycle or GBP/CHF shock hits Sword harder than the average European IT services firm.

Background — five things to know before the case

Context the share price doesn't carry on its face. Skim this once and the bull / bear bullets below stop reading as inside baseball.

Sword is a pan-European IT services consolidator founded in 2000, listed Paris (SWP.PA), incorporated Luxembourg. ~3,600 specialists serve regulated verticals (finance, energy, public sector) across 50+ countries. 2025 revenue €358M; H1–Q1 2026 run-rate points to €400M+. CEO Jacques Mottard has run the firm since inception (17.9% via Financière Sémaphore).
Revenue went from €194M (2018) to €358M (2025) — ~9% reported CAGR, organic 12–26%/yr in 5 of the last 7 years. FY2019 +20.7%, FY2021 +21.5%, FY2022 +26.3%, FY2023 +19.0%, FY2024 +15.9%, FY2025 +12.3%. Q1 2026 organic +11.7% vs internal budget of +0.9% (a ~12x beat). Backlog at 21.7 months of activity.
Capital structure flipped from net cash +€17.8M (Dec 2024) to net debt −€28.2M (Dec 2025). First net-debt year in 10y. Cause: three bolt-on acquisitions (Full On Net €8.4M, Bubble Go CHF 2.9M, iDelta £1.5M) plus drawing €56M credit line to fund the €2.00/share annual dividend (€19M, 99% of earnings / 102% FCF). CirrusHQ (UK, May 2026) adds to the M&A cadence.
Only 2 named analysts cover SWP.PA: Oddo BHF (Outperform, PT €43) and TP ICAP Midcap (Buy, PT €47). No major institution has reported a position in the last 12 months. Lux domicile + family extraction + €385k average daily volume are structural repellents. This is the textbook “0–2 analyst” mispricing setup.
Eximium (Michel Baulé's holding, 20%) + Financière Sémaphore (Mottard, 17.9%) = 38% of float in two hands. Eximium's cost basis and exit horizon are unknown to public investors. Mottard-family billing (Financière Sémaphore “strategic services” to Sword) was €350k in FY2023, €850k in FY2022. Nicolas Mottard (board, anesthesiologist) and Guillaume Mottard (DG) are the succession signals.

Where we diverge from the sector

Each row asks: if we'd used the sector median for this one assumption instead of our override, how much would the share price change? Negative = our override is more conservative (worth less); positive = more aggressive (worth more). Skim down the rightmost column to see which bets are doing the work.

Assumption

Our input

Sector median

Value impact vs default

01 Revenue growth Y1–5 blended CAGR

11.5% Q1 +11.7% organic beat + 3% bolt-on

~9.0% Computer Services global industry standard

+€4–6

02 Operating margin Year-10 EBIT target

7.5% Industry median; no specialization premium

7.4% Computer Services global industry standard

03 Sales-to-capital Reinvestment efficiency

2.5 Goodwill-heavy roll-up (council revision)

5.2 Computer Services global industry standard

−€18–22

04 Terminal growth Year 10+ steady-state

2.4% EUR risk-free ceiling (Damodaran rule)

2.4% Same (at the risk-free rate ceiling)

05 Cost of capital WACC via levered β

5.73% β=0.90 5Y regression; boutique backlog discount

~7.0% β=1.20 Computer Services re-levered sector standard

+€6–8

Net effect of overrides

Sales-to-capital revision (−€18–22) dominates. Beta and growth overrides add back +€10–14, leaving a net −€8–10/share vs all-sector-defaults. The more conservative reinvestment assumption is the largest single swing.

−€8–10

Our override Sector median Override adds value Override subtracts value

The story & the five claims

The 10-year story this DCF is built on, plus the five anchor claims that translate the story into model inputs.

The 10-year story

Sword is two companies stacked in one stock: an operating IT services business that is genuinely accelerating — Q1 2026 organic growth 12x above internal budget, 21.7-month backlog, ROIC expanding from a −48% restructuring trough in 2022 to 14–20% today — and a capital structure that systematically redistributes that value to the controlling family (99% earnings payout funded by drawing the credit line, €500k/yr related-party fees, two Mottard sons positioned in exec/board roles). The base case credits the organic momentum through 2031 (11.5% blended growth Y1–5, organic ~9% + bolt-on ~3%), then lets revenue converge to Europe's long-run nominal growth by Y10. Year-10 EBIT margin is held at 7.5% — the Computer Services industry median — with no specialization premium (the council tightened this from 8.5%: Accenture and Capgemini are already guiding margins lower under AI productivity pressure). The 20% governance discount is the explicit price of the wrapper: even after applying it, intrinsic per-share lands at €53.24 versus the market price of €32.15. The bet is that the operating business catches up to the analyst consensus PT (€43–47) before the wrapper destroys value. The H1 2026 release (expected mid-September 2026) is the next data point.

Two debates worth pressure-testing

Can AI commoditize Sword's staff-aug margins faster than 50bp/decade?

Our view: Yes, and we price it — year-10 EBIT margin at 7.5% (industry median, no specialization premium), cut 110bp from the original 8.5% draft. If bear-case 5.5% lands instead, equity per share compresses to ~€38–42 range (MC P5-P15 territory).

Does the 99% FCF payout contradict the 2028 growth plan?

Our view: Arithmetically yes — funding €140M M&A while paying 99% FCF requires drawing debt (€56M credit line already drawn). The dividend gets cut or equity gets issued before 2028. Either outcome reprices the yield-support floor at €32.

CLAIM 01 Revenue grows from €363M TTM to ~€755M by 2036. growth_high 11.5% (Y1–5) → 2.4% (Y10) Q1 2026 organic +11.7%; 21.7-month backlog; management reaffirmed +12% for 2026. 8-year empirical range 12–26% organic in 5 of 7 years.

CLAIM 02 Year-10 EBIT margin 7.5% — at industry median, no premium. target_op_margin 0.075 (council revision from 0.085) Accenture and Capgemini already guiding margins lower under AI pricing pressure. Staff-augmentation IT services is the most exposed sub-sector to GenAI productivity arbitrage.

CLAIM 03 Sales-to-capital 2.5 — roll-up goodwill drag priced in. sales_to_capital_y1_5: 2.5 (council revision from 4.0) Goodwill €80M already exceeds book equity €76M. 2028 plan implies €210–280M additional goodwill. Services-firm averages (5.2x) are for organic-growth businesses, not roll-ups.

CLAIM 04 Margin converges by Y5; growth converges to EUR risk-free by Y10. year_of_convergence: 5 · terminal_growth: 2.4% 25-year operating history; margin compression 60% complete (9.0% → 7.5% target = 150bp to go). Mature-firm convergence, not growth-firm extension.

CLAIM 05 20% governance discount; 2% failure probability. governance_discount: 0.20 · failure_probability: 0.02 Five separate governance signals: Mottard family extraction (€500k/yr fees), dynastic succession, Eximium 20% overhang, 99% payout funded by debt, and institutional repellents. First net-debt year elevates failure probability above zero.

Where we diverge from sell-side

Beta 0.90 vs sector-median 1.20. Triangulated to 5Y regression (Yahoo 0.90, SimplyWallSt 0.90 — StockAnalysis 0.99 outlier excluded). Founder-led boutique with 21.7-month backlog has materially lower covariance with market than the broad Computer Services aggregate would imply. Net WACC impact: −70bp → +€4–6/share to intrinsic vs sector default.
20% governance haircut is already applied; sell-side ignores it. Both analyst targets (€43, €47) use no explicit governance discount. Our €53.24 already incorporates the full council-revised haircut (€66.55 pre-gov). If governance resolves cleanly, the pre-gov value is the upside case.
Sales-to-capital 2.5, not the services-sector average 5.2. The mechanical difference between a goodwill-heavy roll-up and an organic-growth services firm — €20–25/share of intrinsic difference between using our 2.5 and the Damodaran Computer Services median.
Q1 2026 organic +11.7% — a 12x beat on internal budget — is not in any consensus model. H1 2026 release (mid-Sept) is the next catalyst. If the beat holds at half-year, the market may force coverage expansion.

Two-sided case — bear anchors

UK O&G customer cliff (base-case risk per council). 5 of top-10 customers (BP/Harbour/SSE/Serica/Taqa/Total) under the 78% Energy Profits Levy through 2030. Multi-year consulting capex freeze hits 30% of revenue. MC P5 (€34.50) is the implied floor if this plus AI compression land simultaneously.
Year-10 margin 5.5% instead of 7.5% closes the gap to market. If GenAI cuts staff-aug day-rates 25%+ over the decade (bear MC tail), FCFF shrinks and intrinsic approaches the current price range. The P5 distribution tail is not academic.
Governance escalates: haircut 30% instead of 20%. If Mottard succession turns messy, Eximium block-sells, or related-party fees scale to 3–4% EBITDA, per-share intrinsic drops from €53 to €46. MC encodes this in the governance_discount triangular (mode 20%, high 30%).
Roll-up arithmetic breaks by 2027. If bolt-on multiples expand to 3–4× revenue as AI/cloud targets reprice, goodwill creation outstrips cash generation, covenant triggers on the €56M credit line, and the dividend cuts. Yield support collapses; price may overshoot to €20–25 range before fundamentals reassert.

Risks to thesis (tail, not bear case)

UK Energy customer concentrationBASE CASE

5 of top-10 clients (BP/Harbour/SSE/Serica/Taqa/Total) under UK Energy Profits Levy 78% through 2030. A sustained capex freeze hits ~30% of revenue. Council flagged this as base-case risk, not tail — modelled via asymmetric MC band.

AI commoditization of staff-aug ITHIGH

Staff-augmentation is the sub-sector most exposed to GenAI productivity arbitrage. Accenture and Capgemini already guiding margins lower. Bear MC tail at 5.5% EBIT margin implies equity ~€38–42/sh.

Mottard succession overhangMED

Founder (70+) has two sons positioned (Guillaume DG, Nicolas board) but no public transition plan. PE take-private at premium vs dynastic transfer at discount are both plausible outcomes; governance haircut could swing ±10pp.

Payout vs growth arithmeticMED

99% earnings / 102% FCF payout funded by drawing debt. Either the dividend cuts (yield floor collapses) or equity issues (dilutes ~5–8%). Incompatible with a 3-year €140M M&A plan unless organic cash generation doubles.

Eximium 20% block overhangMED

Largest single shareholder with unknown cost basis and exit horizon. Block sale at 12k shares/day ADV = 3–6 months of volume at a discount. Price dislocation risk is real regardless of fundamental value.

Goodwill impairment riskLOW

€80M goodwill already exceeds €76M book equity. IFRS test triggers if margins slip. Could trip covenant on €56M credit line. Low probability but material if it hits.

10-year forecast

Revenue €405M (Y1) → €837M (Y10), 7.5% CAGR. Operating margin fades from 9.0% TTM base to 7.50% by Y5, held flat to Y10. FCFF accelerates Y6–10 as margin stabilises and reinvestment needs taper.

Monte Carlo distribution

Even at the 5th-percentile outcome (€34.50/sh — joint worst-case of revenue, margin, terminal growth, capital intensity, and governance discount), intrinsic sits +7% vs the €32.15 market price. The median outcome (€50.06) is +56% above market; P(undervalued) = 97.5%.

1,000 iterations randomising 5 axes (revenue growth, op margin, terminal growth, sales-to-capital, governance discount) with correlations per mc.yaml. P(intrinsic < market €32.15) = 2.5% — only 2.5% of simulations produce an intrinsic below today's price.

Mean €50.81 ± €10.65/sh · P5 €34.50 · P25 €43.12 · P50 €50.06 · P75 €58.23 · P95 €69.71

Sources & process trail

Research provenance for the assumptions above. Each anchor links to the underlying document.

Filings corpus digest (7 documents, FY2018–FY2025 + Q1 2026): valuations/sword/filings/filings_corpus_digest.md — 2,832 words, 7 anchor sections covering revenue progression, margin durability, capital allocation, governance, competitive positioning, customer concentration, AI strategy.
Context check (Exa web search, 8 parallel queries, May 2026) — verdict 🟢 “Dig deeper.” Q1 2026 organic +11.7% vs budget +0.9%; backlog 21.7 months; 2026 guidance reaffirmed.
LLM Council pressure-test (5 advisors + 3 reviewers + chairman, 2026-05-25): valuations/sword/council/council-report-2026-05-25.html. Three council revisions applied: target_op_margin 8.5% → 7.5%; sales_to_capital 4.0 → 2.5; governance_discount 12% → 20%.
Country mix rationale (17-country revenue decomposition): valuations/sword/country_mix_rationale.md — weighted CRP ≈ 0.70% reflecting UK/CH/BeLux dominance.
Monte Carlo overlay (5 axes, correlated triangular distributions): valuations/sword/mc.yaml — revenue growth [6%, 11.5%, 15%]; op margin [5.5%, 7.5%, 9.5%]; governance discount [12%, 20%, 30%]; sales-to-capital [1.8, 2.5, 3.5]; terminal growth N(2.4%, 0.4%, clip 1%–2.4%).
Damodaran data snapshot: country risk premiums 2026-01-01 · Computer Services industry (global) 2026-01-01 · EUR risk-free 2024-09-01 (2.40%).

⚠ Active diagnostic: terminal_growth (0.0240) ≥ risk_free_rate (0.0240); Damodaran’s stable-growth ceiling is the risk-free rate. Terminal growth is pinned to the EUR risk-free rate exactly (2.40%), which is also the risk-free input — expected and correct for a mature firm valued at the ceiling.

Cost of capital build

Risk-free rate	2.40%
Mature-market ERP	4.23%
Levered β	0.90
Weighted CRP	0.70%
Cost of equity	6.83%
Pre-tax cost of debt (synth A3/A-)	2.45%
D / V	~20%
WACC	5.73%

Full year-by-year DCF

Year	Revenue	Op mgn	EBIT	EBIT(1−t)	Reinvest	FCFF	PV
1	€405M	8.69%	€35M	€29M	€17M	€12M	€12M
2	€451M	8.39%	€38M	€31M	€19M	€12M	€11M
3	€503M	8.09%	€41M	€33M	€21M	€13M	€11M
4	€561M	7.80%	€44M	€36M	€23M	€13M	€10M
5	€625M	7.50%	€47M	€39M	€26M	€13M	€10M
6	€686M	7.50%	€51M	€41M	€24M	€17M	€12M
7	€740M	7.50%	€55M	€44M	€22M	€22M	€15M
8	€785M	7.50%	€59M	€46M	€18M	€28M	€18M
9	€818M	7.50%	€61M	€47M	€13M	€33M	€20M
10	€837M	7.50%	€63M	€47M	€8M	€39M	€22M

Methodology & flags

Damodaran FCFF DCF, 10y explicit forecast + terminal value perpetuity. R&D not capitalised (immaterial <3% revenue, expensed in personnel costs). IFRS-16 lease liabilities already included in book debt (€12.0M). Country-risk premium from 17-country revenue-weighted decomposition × Damodaran 2026 CRPs. 20% governance discount applied post-DCF per council pressure-test (was 12% in D’s first draft). Monte Carlo: 1,000 iterations, 5 axes sampled with correlated triangular distributions. Engine v1.0.0 · result: 2026-05-25-result.json

R&D cap: OFF · Lease cap: OFF · Failure: ON (2% prob) · ESO: OFF
Governance haircut: 20% applied post-DCF (€66.55 → €53.24)
Sensitivity tornado: not run (Monte Carlo supersedes — 5-axis correlated simulation)

FCFF DCF · dark theme v3. Generated 2026-05-30T08:05:18 from /Users/valentin/Documents/notes_jiliac_labs/Finance/Damodaran/valuations/sword/output/2026-05-25-result.json.