SWX:SGSN

Stock Analysis Report

Executive Summary

SGS SA provides inspection, verification, testing, certification, and quality assurance services in Europe, Africa, the Middle East, the Americas, and the Asia Pacific.

Rewards

Earnings are forecast to grow 5.81% per year

Earnings grew by 20.5% over the past year

Pays a high and reliable dividend of 2.94%

Risk Analysis

Has a high level of debt

Large one-off items impacting financial results



Snowflake Analysis

Established dividend payer with proven track record.


Similar Companies

Lonza Group

SWX:LONN

Share Price & News

How has SGS's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: SGSN has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

2.1%

SGSN

0.7%

CH Professional Services

2.3%

CH Market


1 Year Return

15.7%

SGSN

24.4%

CH Professional Services

19.8%

CH Market

Return vs Industry: SGSN underperformed the Swiss Professional Services industry which returned 25.7% over the past year.

Return vs Market: SGSN underperformed the Swiss Market which returned 18.9% over the past year.


Shareholder returns

SGSNIndustryMarket
7 Day2.1%0.7%2.3%
30 Day2.2%3.2%2.0%
90 Day7.7%10.7%8.2%
1 Year19.5%15.7%27.9%24.4%25.6%19.8%
3 Year42.7%29.4%50.7%38.5%41.0%24.0%
5 Year87.6%58.6%95.2%69.8%56.2%31.3%

Price Volatility Vs. Market

How volatile is SGS's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is SGS undervalued compared to its fair value and its price relative to the market?

27.56x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: SGSN (CHF2655) is trading above our estimate of fair value (CHF2407.67)

Significantly Below Fair Value: SGSN is trading above our estimate of fair value.


Price To Earnings Ratio

PE vs Industry: SGSN is poor value based on its PE Ratio (27x) compared to the Professional Services industry average (21.4x).

PE vs Market: SGSN is poor value based on its PE Ratio (27x) compared to the Swiss market (20.4x).


Price to Earnings Growth Ratio

PEG Ratio: SGSN is poor value based on its PEG Ratio (4.6x)


Price to Book Ratio

PB vs Industry: SGSN is overvalued based on its PB Ratio (15.6x) compared to the XE Professional Services industry average (2.3x).


Next Steps

Future Growth

How is SGS forecast to perform in the next 1 to 3 years based on estimates from 19 analysts?

5.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: SGSN's forecast earnings growth (5.8% per year) is above the savings rate (-0.6%).

Earnings vs Market: SGSN's earnings (5.8% per year) are forecast to grow slower than the Swiss market (10.4% per year).

High Growth Earnings: SGSN's earnings are forecast to grow, but not significantly.

Revenue vs Market: SGSN's revenue (2.5% per year) is forecast to grow slower than the Swiss market (3.6% per year).

High Growth Revenue: SGSN's revenue (2.5% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: SGSN's Return on Equity is forecast to be very high in 3 years time (42.5%).


Next Steps

Past Performance

How has SGS performed over the past 5 years?

2.8%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: SGSN has a large one-off gain of CHF250.0M impacting its June 30 2019 financial results.

Growing Profit Margin: SGSN's current net profit margins (11.1%) are higher than last year (9.4%).


Past Earnings Growth Analysis

Earnings Trend: SGSN's earnings have grown by 2.8% per year over the past 5 years.

Accelerating Growth: SGSN's earnings growth over the past year (20.5%) exceeds its 5-year average (2.8% per year).

Earnings vs Industry: SGSN earnings growth over the past year (20.5%) exceeded the Professional Services industry 10.5%.


Return on Equity

High ROE: Whilst SGSN's Return on Equity (57.71%) is outstanding, this metric is skewed due to their high level of debt.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is SGS's financial position?


Financial Position Analysis

Short Term Liabilities: SGSN's short term assets (CHF2.8B) exceed its short term liabilities (CHF1.9B).

Long Term Liabilities: SGSN's short term assets (CHF2.8B) do not cover its long term liabilities (CHF2.9B).


Debt to Equity History and Analysis

Debt Level: SGSN's debt to equity ratio (168.6%) is considered high.

Reducing Debt: SGSN's debt to equity ratio has increased from 83.6% to 168.6% over the past 5 years.

Debt Coverage: SGSN's debt is well covered by operating cash flow (47.4%).

Interest Coverage: SGSN's interest payments on its debt are well covered by EBIT (38.3x coverage).


Balance Sheet

Inventory Level: SGSN has a high level of physical assets or inventory.

Debt Coverage by Assets: SGSN's debt is covered by short term assets (assets are 1.2x debt).


Next Steps

Dividend

What is SGS's current dividend yield, its reliability and sustainability?

2.88%

Current Dividend Yield


Dividend Yield vs Market

company2.9%marketbottom25%1.7%markettop25%3.4%industryaverage2.3%forecastin3Years3.2%

Current dividend yield vs market & industry

Notable Dividend: SGSN's dividend (2.94%) is higher than the bottom 25% of dividend payers in the Swiss market (1.73%).

High Dividend: SGSN's dividend (2.94%) is low compared to the top 25% of dividend payers in the Swiss market (3.42%).


Stability and Growth of Payments

Stable Dividend: SGSN's dividends per share have been stable in the past 10 years.

Growing Dividend: SGSN's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: At its current payout ratio (79.2%), SGSN's payments are covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: SGSN's dividends in 3 years are forecast to be covered by earnings (89.6% payout ratio).


Next Steps

Management

What is the CEO of SGS's salary, the management and board of directors tenure and is there insider trading?

3.3yrs

Average management tenure


CEO

Frankie Ng (53yo)

4.8yrs

Tenure

0

Mr. Frankie Ng serves as Executive Vice President of Transportation (A.I.) at SGS SA since November 2019. Mr. Ng serves as Chief Operating Officer at SGS SA since July 2019. Mr. Frankie Ng has been the Chi ...


CEO Compensation Analysis

Compensation vs Market: Frankie's total compensation ($USD0.00) is below average for companies of similar size in the Swiss market ($USD4.98M).

Compensation vs Earnings: Frankie's compensation has been consistent with company performance over the past year.


Management Age and Tenure

3.3yrs

Average Tenure

59.5yo

Average Age

Experienced Management: SGSN's management team is considered experienced (3.3 years average tenure).


Board Age and Tenure

6.5yrs

Average Tenure

58.5yo

Average Age

Experienced Board: SGSN's board of directors are considered experienced (6.5 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Jean-Luc de Buman (66yo)

    Senior Vice President of Corporate Development

    • Dirk Hellemans (61yo)

      Chief Operating Officer of North & Central Europe

      • Tenure: 4.2yrs
    • Ewald van der Helm

      Global Head of Internal Audit & Senior VP

      • Dennis Yang (70yo)

        Chief Operating Officer of Eastern Asia

        • Dominik de Daniel (44yo)

          Chief Financial Officer

          • Tenure: 0.9yrs
        • Fred Herren (64yo)

          Senior Vice President of Digital & Innovation

          • Tenure: 17yrs
        • Frankie Ng (53yo)

          CEO, COO & Executive VP of Transportation (A.I.)

          • Tenure: 4.8yrs
        • Olivier Merkt (57yo)

          General Counsel & Chief Compliance Officer

          • José Hernández-Sampelayo (58yo)

            Senior Vice President of Human Resources

            • Tenure: 2.5yrs
          • Christoph Heidler

            Chief Information Officer

            • Tenure: 1yrs

          Board Members

          • Paul Desmarais (65yo)

            Director

            • Tenure: 6.5yrs
            • Compensation: CHF150.00k
          • Gérard Lamarche (58yo)

            Director

            • Tenure: 6.5yrs
            • Compensation: CHF180.00k
          • Shelby du Pasquier (59yo)

            Director

            • Tenure: 13.8yrs
            • Compensation: CHF210.00k
          • August von Finck (51yo)

            Director

            • Tenure: 17.7yrs
            • Compensation: CHF180.00k
          • Ian Gallienne (48yo)

            Director

            • Tenure: 6.5yrs
            • Compensation: CHF180.00k
          • Peter Kalantzis (74yo)

            Chairman of the Board

            • Tenure: 1.5yrs
            • Compensation: CHF259.00k
          • Cornelius Grupp (72yo)

            Director

            • Tenure: 8.8yrs
            • Compensation: CHF180.00k
          • Calvin Grieder (64yo)

            Director

            • Tenure: 1yrs
          • Kory Sorenson (51yo)

            Director

            • Tenure: 0.8yrs
          • Luitpold von Finck (48yo)

            Director

            • Tenure: 1yrs

          Company Information

          SGS SA's company bio, employee growth, exchange listings and data sources


          Key Information

          • Name: SGS SA
          • Ticker: SGSN
          • Exchange: SWX
          • Founded: 1878
          • Industry: Research and Consulting Services
          • Sector: Commercial Services
          • Market Cap: CHF20.617b
          • Shares outstanding: 7.57m
          • Website: https://www.sgs.com

          Number of Employees


          Location

          • SGS SA
          • 1 Place Des Alpes
          • PO Box 2152
          • Geneva
          • Geneva
          • 1211
          • Switzerland

          Listings

          TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
          SGSNSWX (SIX Swiss Exchange)YesRegistered SharesCHCHFJul 1992
          0QMILSE (London Stock Exchange)YesRegistered SharesGBCHFJul 1992
          SUVNDB (Deutsche Boerse AG)YesRegistered SharesDEEURJul 1992
          SGSO.FOTCPK (Pink Sheets LLC)YesRegistered SharesUSUSDJul 1992
          SGSO.YOTCPK (Pink Sheets LLC)UNSPONSORED ADRUSUSDAug 2004
          SGSNESWX (SIX Swiss Exchange)CHF1 (REGD)(2ND BUY BACK)CHCHFMay 2017

          Biography

          SGS SA provides inspection, verification, testing, certification, and quality assurance services in Europe, Africa, the Middle East, the Americas, and the Asia Pacific. It operates in nine segments: Agriculture, Food and Life; Mineral Services; Oil, Gas and Chemicals Services; Consumer and Retail Services; Certification and Business Enhancement; Industrial Services; Environment, Health and Safety Services; Transportation Services; and Governments and Institutions Services. The company offers inspection services to reduce risk, control quality and quantity, and meet relevant regulatory requirements in various regions and markets; and product testing services. It also provides verification services; certification services that enable its customers to demonstrate that their products, processes, systems, and services are compliant with national and international regulations and standards; workforce training services; and consultancy, outsourcing, and data analytics services. The company serves the agriculture and food, chemical, construction, consumer goods and retail, energy, environment, health and safety, industrial manufacturing, life sciences, logistics, mining, oil and gas, public, risk management, sustainability, trade, and transportation sectors. SGS SA was founded in 1878 and is headquartered in Geneva, Switzerland. 


          Company Analysis and Financial Data Status

          All financial data provided by Standard & Poor's Capital IQ.
          DataLast Updated (UTC time)
          Company Analysis2020/01/22 20:46
          End of Day Share Price2020/01/21 00:00
          Earnings2019/06/30
          Annual Earnings2018/12/31


          Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.