Sinch: Smart Buybacks at SEK 24, Too Expensive at 46
Sinch bought back its own shares in 2026 at an average SEK 24.33. My fair value is about SEK 34, the price SEK 45.95. Rating Reduce.
In the first half of 2026 Sinch bought back about 67.7m of its own shares for SEK 1,648m, at an average of SEK 24.33 per share [own calculation].[1] Today the stock trades at SEK 45.95.[2] It is rare to see so clearly that management collected its own shares cheaply. I wanted to know whether anything is left for new buyers after this jump. My answer: the core business is highly profitable, the past acquisitions are not, and the price already anticipates a good future.
Sinch routes messages, calls and emails from businesses to network operators and keeps about a third of revenue as gross profit. On operating capital the business earns over 100%, but on total capital including the expensively acquired goodwill only 6.6%, less than my 9.5% cost of capital. My cash flow model gives a fair value of about SEK 34, 27% below the price. Even if value grows at the full cost of capital, I expect −1.3% p.a. over three years. Rating: Reduce, entry only below SEK 29.
This article comes as a pair with the smaller Dutch competitor: CM.com: Finally Profitable, but No Return on Capital Yet.
1. Sinch collects the spread between businesses and network operators
Sinch sells communications as a programming interface, CPaaS for short (Communications Platform as a Service). A customer such as a bank sends a text with a verification code to Sinch, and Sinch routes it through a network operator to the recipient. Sinch passes on the operator's fee and keeps the mark-up. Over the last twelve months revenue of SEK 26,773m compared with gross profit of SEK 9,211m.[1] In other words, about two thirds of revenue is operator fees passed through. The economically relevant figure is therefore gross profit, not revenue. Sinch says so itself in its definitions.[1]
| Product category Q2 2026 | Revenue | Gross profit | Gross margin | Organic gross profit growth |
|---|---|---|---|---|
| Applications (software for marketing and service) | SEK 786m | SEK 528m | 67% | −3% |
| API Platform (messaging, voice, email) | SEK 4,757m | SEK 1,218m | 26% | −1% |
| Network Connectivity (services for operators) | SEK 1,323m | SEK 554m | 42% | 16% |
| Group | SEK 6,866m | SEK 2,300m | 33.5% | 2% |
Source: Interim report Q2 2026, gross margins own calculation.[1]
Regionally, Sinch has long been an American company headquartered in Stockholm. The Americas delivered 66% of gross profit in the second quarter and grew 10% organically. EMEA shrank 4%, APAC 18%, mainly because of the SMS business in India.[1] In other words, group growth of 2% is an average of one strong and two weak parts.
2. Unit economics: about one öre per interaction
The smallest unit at Sinch is a single interaction: a text, a call, an email. According to the company, Sinch handles more than 900bn interactions a year.[1]
- Gross profit per interaction: SEK 9,211m ÷ 900bn ≈ 1 öre [own back-of-the-envelope calculation, interactions rounded]
- Of this, adjusted EBITDA retains 3,528 ÷ 9,211 = 38% of gross profit
- Capex: SEK 620m over twelve months, almost exactly the depreciation on own assets of SEK 607m
- In other words: additional interactions require hardly any additional capital
Sources: gross profit, adjusted EBITDA, capex and depreciation from the Q2 2026 interim report.[1] Depreciation on own assets is total depreciation and amortisation of SEK 2,269m minus SEK 1,662m of amortisation on acquired customer relationships and software [own calculation].
The competitive advantage sits in the network. Sinch has direct connections to more than 600 network operators, its own voice network and established relationships with email providers.[1] Anyone who must reliably deliver billions of messages is reluctant to switch to a smaller provider. But the advantage protects access, not price. This shows in the API margin: it fell from 28.9% in the second quarter of 2025 to 25.6% [own calculation].[1] Sinch explains part of this with costs from US suppliers that were passed on to customers without a mark-up. This metric is my early warning signal: if the API margin keeps falling, the moat is eroding.
3. Return on capital: the business earns handsomely, the acquisitions do not
This is where it is decided whether Sinch creates value. I use the figures for the twelve months to June 2026 and exclude amortisation on acquired customer relationships and software, because the purchase price already counts as capital.
| Step | Calculation | Result |
|---|---|---|
| EBIT, last twelve months | per report | SEK 1,042m |
| + acquisition amortisation | per report | SEK 1,662m |
| × (1 − tax rate 25%) | (1,042 + 1,662) × 0.75 | SEK 2,028m |
| Invested capital 06/2026 | 22,982 + 5,758 + 2,399 − 750 | SEK 30,389m |
| Invested capital 06/2025 | 25,584 + 4,134 + 1,822 − 717 | SEK 30,823m |
| ROIC including goodwill | 2,028 ÷ 30,606 | 6.6% |
| ROIC under IFRS | 1,042 × 0.75 ÷ 30,606 | 2.6% |
| Capital excluding goodwill and acquired relationships | average of 06/2025 and 06/2026 | SEK 1,904m |
| ROIC of the core business | 2,028 ÷ 1,904 | about 106% |
Formula: ROIC = operating profit × (1 − tax rate) ÷ average invested capital (equity + interest-bearing debt − cash). Values from the interim report.[1] The 25% tax rate is my assumption; the reported rate for the half year was 34%.
Goodwill and acquired customer and operator relationships add up to SEK 28,500m, 94% of invested capital [own calculation].[1] In other words, Sinch itself needs almost no capital, but shareholders paid a great deal for past acquisitions. On that price Sinch earns 6.6%. I set my cost of capital at 9.5%, because Sinch is indebted and more volatile than a large conglomerate.
“The core business earns over 100% on its capital. Shareholders earn 6.6% on what they paid for it.”
Growth quality: organic, almost without capital
Growth only creates value if the additional capital earns more than it costs. At Sinch, net investment in the own business is close to zero: SEK 620m of capex against SEK 607m of depreciation on own assets, a difference of SEK 13m [own calculation].[1] Organic growth therefore costs hardly any capital and earns far above the cost of capital. A clean return on incremental capital cannot be calculated, because exchange rates move invested capital heavily. For acquisitions, by contrast, the total return of 6.6% shows that past prices were too high. At present the money goes not into acquisitions but into own shares.
| My test | Result | Reason |
|---|---|---|
| Return on capital above cost of capital | ❌ failed | 6.6% on total capital, 9.5% cost; only the core business passes |
| Understandable competitive advantage | ✅ passed | Direct network access and scale; watch erosion in the API margin |
| 15% p.a. hurdle | ❌ failed | −1.3% p.a. at the current price (section 6) |
| Growth quality | ✅ organic / ❌ acquisitions | Organic growth almost capital-free, acquisitions below the cost of capital |
4. Buybacks at SEK 24 were smart; at 46 they no longer are
Over the last twelve months Sinch bought back 15% of its outstanding shares.[1] This cost SEK 4,056m, almost twice the free cash flow of SEK 2,155m. The difference came from new debt: net debt rose within a year from SEK 5,238m to SEK 7,408m, 1.9x adjusted EBITDA.[1] Sinch's own ceiling is 2.5x.
At an average of SEK 24.33 these purchases were a good deal, as my fair value is about 40% higher. At today's price the calculation reverses: every krona Sinch now puts into its own shares buys less value than it costs. For the valuation it therefore matters whether management slows buybacks at high prices. In the second quarter Sinch bought own shares for only SEK 95m, after SEK 1,553m in the first quarter.[1]
5. What Sinch is worth: about SEK 34
I value Sinch with a cash flow model based on free cash flow to equity (FCFE). Reported free cash flow already includes interest and taxes; I also deduct lease payments. The key question is which cash conversion, i.e. which share of adjusted EBITDA arrives as free cash flow, holds permanently. In 2025 it was 40%, over the last twelve months 61%, and Sinch itself guides 40 to 50%.[1][3] I use the top of its own guidance.
| Step | Calculation | Result |
|---|---|---|
| Adjusted EBITDA, last twelve months | per report | SEK 3,528m |
| Normalised free cash flow after leases | 3,528 × 50% − 101 | SEK 1,663m |
| Free cash flow per share | 1,663 ÷ 702.4m shares | SEK 2.37 |
| Bear (30%) | 0% growth, 10.5% discount rate | SEK 26.11 |
| Base (50%) | 4% growth, 9.5% discount rate | SEK 35.05 |
| Bull (20%) | 6.4% growth, 9.0% discount rate | SEK 41.59 |
| Fair value | 0.3 × 26.11 + 0.5 × 35.05 + 0.2 × 41.59 | SEK 33.68 |
Formula: five years of growth at the scenario rate, then 2% perpetual growth, discounted at the respective rate. The bull case takes the midpoint of Sinch's 7 to 9% growth target with my usual 20% haircut on management targets.[1] Shares outstanding as at 30 June 2026.[1]
Bear case (30%)
SEK 26.11
- APAC and EMEA keep dragging
- Free cash flow stagnates
Base case (50%)
SEK 35.05
- Americas carries, rest stable
- Free cash flow grows 4% p.a.
Bull case (20%)
SEK 41.59
- 2027 target largely met
- Free cash flow grows 6.4% p.a.
The cross-check: if I use the current cash conversion of 61% instead of 50%, fair value rises to SEK 41.59 [own calculation]. Even then it is below the price. Conversely, on a normalised basis the price of SEK 45.95 implies cash flow growth of 10.5% p.a. over five years, more than Sinch's own target.
6. Why the price leaves no return
| Step | Calculation | Result |
|---|---|---|
| Fair value in three years | 33.68 × 1.095³ | SEK 44.22 |
| Return p.a. | (44.22 ÷ 45.95)^(1/3) − 1 | −1.3% |
| Entry for 15% p.a. | 44.22 ÷ 1.15³ | SEK 29.08 |
| Cross-check with 61% cash conversion | (41.59 × 1.095³ ÷ 45.95)^(1/3) − 1 | 5.9% |
Formula: (value in three years ÷ purchase price)^(1/3) − 1. Assumption: because Sinch pays no dividend, value per share grows at the full 9.5% cost of capital p.a. This is generous, as it assumes buybacks at fair value [own back-of-the-envelope calculation].
Even in the friendly cross-check, 5.9% p.a. is far below my 15% hurdle. Since Sinch also fails the return-on-total-capital test, the stock is not a buy under my rules.
7. Upside and risks: America versus Asia and debt
- Americas grows gross profit 10% organically
- Email grows at double digits, 21% more volume
- Voice network costs fall with the IP migration
- AI agents need communications infrastructure
- APAC −18%, EMEA −4% in gross profit
- API margin falling, pass-through without mark-up
- Net debt SEK 7,408m, buybacks on credit
- Only an acting CEO
Evidence: regions, margin, debt and leadership change from the interim report,[1] email volume from the investor presentation.[4]
Briefly noted
- Laurinda Pang has stepped down as CEO; CFO Jonas Dahlberg leads Sinch on an acting basis.[1]
- At the end of 2024 Sinch recognised a provision of SEK 700m for other taxes; SEK 35m of it has been used so far.[1] A later outflow would increase net debt.
- The market valuation equals 4.3x gross profit and 11.2x adjusted EBITDA [own calculation].[1][2]
- The 9.5% cost of capital is my assumption, not derived from market data.
- Normalised tax rate 25%; the reported rate for the half year was 34%.
- Cash conversion of 50% as a permanent value; the last twelve months were 61%.
- The return on incremental capital cannot be calculated exactly because of currency effects; I base the test on capex versus depreciation.
- Interactions per year (“more than 900bn”) are rounded; the per-interaction calculation is an order of magnitude.
- Exchange rates are left aside; a stronger US dollar would raise the value in kronor.
Conclusion
Sinch owns a core business that needs almost no capital and earns over 100% on it. But shareholders also pay the price of the acquisitions, and on that price only 6.6% comes back. Management bought back its own shares smartly and cheaply in early 2026. After the share price rise, my fair value of about SEK 34 is well below the price of SEK 45.95.
Rating: Reduce. Below SEK 29 I would look at Sinch again; before that, APAC would have to turn and the API margin hold.
Update log
- 25 Oct 2026 — First publication.
Sources
- Sinch Interim Report Q2 2026, Sinch AB (publ), 22 Jul 2026. Revenue, gross profit by region and product, EBITDA, acquisition amortisation, balance sheet, cash flow, free cash flow, net debt, share count, buybacks, provision, leadership change, 2027 targets, definitions. → https://www.group.sinch.com/media/press-releases-and-news/2026/sinch-reports-second-quarter-2026-results--accelerated-revenue-growth-led-by-americas/
- StockAnalysis.com, market data SINCH (price SEK 45.95), as at 19 Oct 2026.
- Sinch Interim Report Q1 2026, Sinch AB (publ), 7 May 2026. Definition of cash conversion, 40–50% guidance, free cash flow 2025. → https://mb.cision.com/Main/22250/4345669/4081351.pdf
- Sinch Q2 2026 Investor Presentation, Sinch AB (publ), 22 Jul 2026. Email volume and growth, growth levers. → ‹TODO: Link›