Somnigroup International (SGI) Margin Compression Challenges Bullish Earnings Growth Narrative

Somnigroup International (NYSE:SGI) FY 2025 Earnings Snapshot

Somnigroup International (NYSE:SGI) has capped FY 2025 with fourth quarter revenue of US$1.9b and basic EPS of US$0.67, setting a clear marker for how its profitability is tracking into year end. The company has seen quarterly revenue move from US$1.2b in Q4 2024 to US$1.9b in Q4 2025, while basic EPS shifted from US$0.41 to US$0.67 over the same period, giving investors a concrete view of how the top and bottom lines have evolved into the latest print. With trailing net profit margin at 5.1% compared to 7.8% a year earlier, the focus now is on how investors weigh softer margins against expectations for stronger earnings ahead.

See our full analysis for Somnigroup International.

With the headline numbers on the table, the next step is to set them against the widely followed narratives around Somnigroup International, to see where the data backs the story and where it starts to push back.

See what the community is saying about Somnigroup International

TTM earnings trail revenue gains

• On a trailing basis, Somnigroup generated US$7.5b in revenue and US$384.1 million in net income, compared with US$4.9b and US$384.3 million a year earlier, so revenue moved higher while net income stayed roughly flat.
• Analysts' consensus view expects earnings to grow much faster than revenue over time. However, the last twelve months show revenue rising from US$4.9b to US$7.5b while net profit margin moved from 7.8% to 5.1%. This contrasts with the idea of margin expansion and instead points to profit growth lagging the top line so far.

High 48x P/E with modest gap to DCF

• The shares trade on a trailing P/E of 48x, well above industry and peer averages of about 13.8x and 15x, while the current price of US$87.78 sits close to the DCF fair value of US$89.43.
• Supporters who point to upside from a DCF fair value slightly above the current price need to weigh that against the rich 48x P/E multiple and a net profit margin of 5.1% that has softened from 7.8%. Together, these figures suggest the market is already assigning a premium even though recent profitability is not tracking the stronger earnings growth profile that bullish arguments rely on.

Interest coverage risk beside earnings growth forecasts

• Over the past year, earnings are forecast to grow about 24.1% per year while revenue is expected to grow about 4.6% per year. Yet current interest payments are described as not well covered by earnings, highlighting a key financial risk.
• Skeptics who focus on the weak interest coverage can point to the combination of a 5.1% net profit margin and a 48x P/E as evidence that the balance between growth expectations and financing risk is tight. This is especially the case since earnings per share over the last five years have declined on average by about 11% per year despite being described as high quality, which challenges the bearish fear of an already distressed business but also means the company does not yet show a clear earnings uptrend to offset that leverage concern.

On top of the headline numbers, many bulls and bears are digging into how these margins and financing risks might shape the story from here, and you can read their full arguments in our dedicated bull and bear breakdowns for Somnigroup International: 🐂 Somnigroup International Bull Case and 🐻 Somnigroup International Bear Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Somnigroup International on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With bulls and bears both finding plenty to talk about, now is a good time to look through the numbers yourself and pressure test the story. A helpful place to start is with our breakdown of 2 key rewards and 3 important warning signs for Somnigroup International, so you can weigh the trade off between the risks and rewards in your own way.

See What Else Is Out There

Somnigroup International combines a softening net profit margin, a high 48x P/E and weak interest coverage, so recent earnings strength does not fully ease financing concerns.

If that balance of rich pricing and a tighter financial cushion makes you uneasy, take a few minutes to size up 80 resilient stocks with low risk scores that prioritize resilience and steadier risk profiles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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