Home » Economy » Dividend bead – Will the SGS stock soon record new market records? | News

Dividend bead – Will the SGS stock soon record new market records? | News

Monday, September 11th, 2017 | Economy

The Swiss Market Index (SMI) has been moving sideways for four months. The shareholders of the Geneva Product Inspectorate Group SGS were even worse off. They not only earned money during this time, they even lost what (see chart). From the highs of mid-June at 2412 francs, the renditest stock has lost about 10 percent. With an increase of 6 percent since the beginning of January, the previous year's balance sheet is rather lean.
This is unjustified, as Credit Suisse now writes in a recent company study. The analyst expects SGS to enter the coming year with growth and higher margins. This is why the CS expert has raised the stock from "Neutral" to "Outperform" with a new 2,385 (previously 2,100) Swiss price target. From there it would then only a cat jump up to the previous best of 2'412 francs.
From now on everything should get better
Over the past few years, the product testing group has been experiencing the threat of customers from the mining industry as well as from the oil and gas industry with the declining raw material prices. This slowed down sales in the Geneva region. At the same time, high pre-invest- ments as well as an adjustment to the outstanding invoices resulted in margins.

The SGS share (red) compared to the SMI (green) (Source: www.cash.ch)
The CS analyst now expects a strong revival on the basis of the deep comparison base from recent years. On the other hand, he also promises a more favorable exchange rate as well as additional company acquisitions.
Analysts nevertheless did not get hot on the stock
With a price-earnings ratio of 22 on the basis of the next-year estimates, the SGS share is not a bargain. However, with a dividend yield of 3.1 per cent, it is one of the dividend-earning securities from the SMI. And if the analyst of Credit Suisse is right, the merchandise testing company will be able to increase Reingewinn by 12 percent annually over the next three years.
Key SGS key figures at a glance:
measure
2017
2018
sales growth
5.1 percent
5.5 percent
profit growth
2.2 percent
9.1 percent
Price-earnings ratio (P / E ratio)
24.6
22.4
dividend yield
3.1 percent
3.2 percent
(Source: Credit Suisse, estimates)
With such optimism, the CS stands rather alone. In addition to Credit Suisse, two other banks advise to buy the SGS share. This means that the buying and selling recommendations are currently balanced. The British HSBC is almost pessimistic. It sees the price quotes to 1'500 francs dive. 14 other banks, on the other hand, regard the share as neutral, as surveys of the news agency AWP betray. At 2,182 Swiss francs, the average price target is close to the closing prices on Friday.

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