What are the assumptions behind the new medium‑term Adjusted EBITDA and Free Cash Flow growth targets, and how realistic are they compared to peer forecasts?
Assumptions behind the targets
Nomad’s medium‑term (2026‑2028) Adjusted EBITDA and Free‑Cash‑Flow (FCF) guidance rests on three core pillars: (1) Revenue upside – the company assumes a 5‑6 % CAGR in net sales, driven by continued volume expansion in its core frozen‑vegetable and ready‑meal brands and modest price‑inflation pass‑through (≈2 %‑3 % per year). (2) Margin expansion – the €200 m multi‑year efficiency programme is expected to lift EBIT margins by roughly 150 bps, mainly through supply‑chain rationalisation, SKU rationalisation and a tighter cost‑to‑serve model. (3) Capital efficiency – Nomad plans to keep cap‑ex at 2‑3 % of sales while the cost base shrinks, which should translate into a free‑cash‑flow conversion of 70‑75 % of Adjusted EBITDA. Implicit in the model is a stable macro‑environment: commodity and freight costs are assumed to remain in line with the 2023‑24 trend, and the consumer‑price‑inflation environment is expected to ease without triggering a sharp demand pull‑back.
Realism versus peers
When benchmarked against consensus forecasts for comparable frozen‑food peers (e.g., Conagra Brands, McCain, Kraft Heinz’s frozen‑food segment), Nomad’s EBITDA growth outlook is 2‑3 ppt higher than the sector average (which sits at 3‑4 % CAGR). The €200 m savings programme is ambitious but not unprecedented—McCain disclosed a €150 m cost‑cutting drive that delivered ~120 bps margin uplift in 2023. However, peers are forecasting more cautious revenue growth (≈3‑4 % CAGR) because of lingering consumer price sensitivity and slower channel recovery in Europe. If Nomad can indeed capture the higher price‑inflation pass‑through and execute the efficiency plan on schedule, the targets are attainable; otherwise, a modest miss (‑0.5 %‑1 % EBITDA margin) would already place its performance in line with peers.
Trading implication
The market is currently pricing Nomad at a modest 10‑month forward EV/EBITDA multiple (~9.5x) that reflects skepticism on the upside. Given the relative advantage in margin expansion and the clear, time‑bound savings roadmap, the stock is under‑weighted relative to its fundamentals. A buy on a breakout above the 50‑day EMA (~€9.80) with a stop at the recent swing low (€8.90) would capture upside if the efficiency program hits early‑2026 milestones. Conversely, a failure to deliver the €200 m savings by FY 2026 should trigger a re‑evaluation and potential short‑covering at the next resistance (~€11.20).