Last Update 17 Mar 26

ALO: Large Contract Wins And Execution Will Support Future P/E Reassessment

Alstom's updated analyst price target has edged higher, with recent €0.90 and €4 price target revisions supported by analysts citing adjusted discount rate assumptions and a steady long term P/E outlook.

Analyst Commentary

Recent research on Alstom presents a mix of optimism and caution, with price target moves and rating changes reflecting different views on how well the company can execute against current expectations.

Bullish Takeaways

Bullish analysts have raised price targets, including a €0.90 increase cited by JPMorgan and separate lifts to €31 from €27, signalling greater confidence in the valuation they are prepared to assign to Alstom based on their current assumptions.
The repeated move to a €31 price target suggests some analysts see room for upside within their models, assuming Alstom can deliver on execution and maintain the earnings profile that underpins their long term P/E outlook.
The decision to keep positive ratings alongside higher targets indicates that, for these bullish analysts, recent information is consistent with their existing growth and profitability frameworks rather than requiring a downgrade in expectations.
Supportive commentary around adjusted discount rate assumptions points to a view that Alstom’s risk profile, as these analysts see it today, is compatible with the higher valuation levels reflected in the new targets.

Bearish Takeaways

Bearish analysts have moved to a more cautious stance, including a downgrade of the shares, which signals concern about Alstom’s ability to deliver against the assumptions currently embedded in some target prices and ratings.
This more cautious view suggests that, for some, the existing share price and prior targets may not offer what they consider to be sufficient compensation for execution risk or potential earnings variability.
The downgrade underscores a view that, while certain models support higher price targets, there is meaningful uncertainty around how consistently Alstom can translate its opportunities into the earnings that justify those valuations.
Overall, the mix of upgraded targets on one side and downgrades on the other highlights a divided analyst stance, where investors are weighing upside potential against concerns about delivery and valuation support.

What's in the News

Secured a €1.03b contract with Comboios de Portugal to supply 153 Adessia Stream trains, including an expanded order and accelerated delivery plan, alongside a new manufacturing facility in Matosinhos that is expected to create close to 300 direct jobs in Portugal (Key Developments).
Received an additional order from SNCF Voyageurs for 15 Avelia Horizon very high speed trains worth approximately €600m, bringing the total contract volume to 160 trains and involving 10 French sites in design and production (Key Developments).
Agreed a 2.3b CAD (about €1.4b) contract with the Toronto Transit Commission for 70 New Subway Trains, with design and engineering in Canada and an expected impact of up to 945 direct and over 1,700 indirect jobs in the country (Key Developments).
Signed a series of rolling stock and maintenance contracts, including approximately €1.4b in the Americas and about €1.1b across Europe, booked in the third quarter of the 2025/26 financial year (Key Developments).
Won multiple passenger train contracts, including a €920m DMU project in Mexico, a €393m Coradia Stream EMU deal in Greece and around a €1.0b share of Melbourne’s Suburban Rail Loop East project, all combining rolling stock supply with multi year maintenance services (Key Developments).

Valuation Changes

Fair value of €26.18 per share is unchanged compared with the prior estimate.
The discount rate has risen slightly from 8.62% to 8.66%, which indicates a marginally higher required return in the updated model.
Revenue growth is held effectively steady at about 4.53% in both the previous and updated assumptions.
The net profit margin is kept broadly unchanged at about 4.09% in the new inputs.
The future P/E is adjusted slightly higher from 17.71x to 17.73x, indicating a very small change in the earnings multiple used in the analysis.

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Key Takeaways

Focus on high-quality, margin-accretive orders in Services and Signaling is expected to boost revenue growth and future margins.
Industrial restructuring and supply chain management improve operational efficiency, enhancing net margins and financial performance.
Supply chain challenges, low-margin legacy contracts, and immature technology reliance strain Alstom's profitability, cash flows, and future revenue growth prospects.

Catalysts

About Alstom

Provides solutions for rail transport industry in Europe, the Americas, Asia and Pacific, the Middle East, Central Asia, and Africa.What are the underlying business or industry changes driving this perspective?

Alstom's strategy of focusing on high-quality, margin-accretive orders, especially in Services and Signaling, is expected to improve revenue growth and increase future gross margins.
The company is conducting industrial restructuring to optimize its manufacturing setup, which aims to enhance operational efficiency and potentially improve net margins and earnings.
Significant future opportunities lie in Alstom's strong order pipeline, especially in Europe, the Middle East, and Asia Pacific, with €200 billion expected in orders over the next three years, which could enhance revenue.
Alstom's ongoing focus on project execution and mitigating supply chain challenges should lead to more efficient delivery volumes, which may improve both earnings and net margins as production stabilizes.
Continuous improvement in gross margins in rolling stock and enhanced contract management could lead to better financial performance and higher profitability, enhancing adjusted EBIT and overall earnings.

Alstom Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Alstom's revenue will grow by 3.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 0.8% today to 4.4% in 3 years time.
Analysts expect earnings to reach €899.9 million (and earnings per share of €1.82) by about September 2028, up from €142.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €1.1 billion in earnings, and the most bearish expecting €719 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.0x on those 2028 earnings, down from 63.3x today. This future PE is lower than the current PE for the GB Machinery industry at 29.7x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.29%, as per the Simply Wall St company report.

Alstom Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Supply chain challenges are causing significant delays in rolling stock production, impacting Alstom's ability to meet contractual deadlines and potentially leading to penalties, affecting future revenue and margins.
A large portion of the current backlog consists of legacy contracts, which continue to weigh on Alstom’s profitability due to lower margins, impacting net earnings growth.
The increased inventory levels due to production delays signify potential working capital challenges, which can strain cash flows and impact free cash flow targets.
The reliance on new technologies with less mature supply chains, such as batteries and fuel cells, poses risks to seamless execution and could affect overall project costs, impacting gross margins.
Weaker-than-expected market conditions in the Americas and green mobility sectors introduce revenue risks if similar trends persist, potentially affecting future revenue growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €23.06 for Alstom based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €33.0, and the most bearish reporting a price target of just €9.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €20.6 billion, earnings will come to €899.9 million, and it would be trading on a PE ratio of 15.0x, assuming you use a discount rate of 8.3%.
Given the current share price of €19.46, the analyst price target of €23.06 is 15.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

High-Quality Orders And Restructuring Will Improve Future Prospects