Valuation of Evolution

Abstract

This thesis estimates the fair value of Evolution AB’s share as of April 14th, 2025, and assesses whether it was over- or undervalued relative to its market price. Evolution AB is a Swedish B2B provider of live and RNG-based online casino solutions, operating in a rapidly growing and increasingly regulated industry. Because the company’s share is traded in Swedish kronor (SEK), the market price at the valuation date, SEK795, was converted to EUR 72.2 for consistency across valuation models.To estimate the fair value, this thesis applies several valuation methods, with a primary focus on a Discounted Cash Flow (DCF) model. This is supported by relative valuation, precedent transaction analysis and a real options approach to capture the value of strategic flexibility under uncertainty. The strategic and macroeconomic context is established through PESTEL and Porter’s Five Forces analysis, which identify key drivers of Evolution’s value, including technological innovation, regulatory developments and shifting consumer behaviour in online gambling. Financial analysis reveals a highly profitable and capital-efficient business model with strong operating margins, a net-cash position and significant free cash flow generation. Based on these fundamentals, the base case DCF implies a fair value of EUR 114.8 per share, representing a 59% upside to the observed market price. The real options analysis, reflecting potential geographic expansion opportunities in U.S. states, adds an additional EUR 11.2 per share. This results in a total implied valuation of EUR 126.0, or a 74% upside. Complementary valuation methods yielded mixed but generally supportive results. Relative valuation using peer multiples and precedent M&A transactions reinforced the case for undervaluation, albeit with a wider range of outcomes depending on multiple selection. In summary, this thesis concludes that Evolution was undervalued as of April 14th, 2025. The market appeared to discount regulatory uncertainty and short-term growth concerns more heavily than warranted by the company’s financial strength and long-term prospects.