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1. Company Snapshot

1.a. Company Description

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 five segments: Connectivity & Products, Health & Nutrition, Industries & Environment, Natural Resources and Knowledge.The company provides laboratory testing, product inspection and consulting, process assessment, technical and transactional assistance; digital solutions, which include cybersecurity, the internet of things, digital platform, and mobile application services.


In addition, it offers a range of testing, inspection and certification solutions for the crop science, food, health science, and cosmetics and hygiene industries; field services, technical assessment and advisory services; and services related to industrial, public health and safety, environmental testing, and public mandates.Further, it provides certification, training, supply chain assurance, technical consulting, and ESG assurance services; and laboratory outsourcing, commodities logistics, geochemistry, metallurgy, sustainability, and market intelligence solutions.The company serves the agriculture and food, chemical, construction, consumer and retail, energy, industrial manufacturing, life sciences, mining, oil and gas, public, and transportation sectors.


SGS SA was founded in 1878 and is headquartered in Geneva, Switzerland.

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1.b. Last Insights on SGSN

Recent news surrounding SGS SA includes the launch of IMPACT NOW for sustainability, a new concept in delivering sustainability services. However, the company is also in talks to combine with French testing firm Bureau Veritas, which could create a European testing and certification company with a combined market value of almost $35 billion. This potential deal may impact SGS' business operations and strategy, and its implications are yet to be seen.

1.c. Company Highlights

2. SGS Delivers Excellent Results, Achieves Key Steps of Strategy 27

SGS delivered an impressive set of results in 2024, with sales reaching a record CHF6.8 billion, up 7.5% organically, and adjusted operating income growing by CHF136 million, representing a 14% growth. The adjusted operating income margin improved by 60 basis points to 15.3%. The company's efficiency program has already significantly improved its margin this year, with a full effect expected to be reached by the end of 2025.

Publication Date: Feb -19

📋 Highlights
  • Strong Sales and Profitability Growth: Net sales reached a record CHF6.8 billion, with 7.5% strong organic growth, and adjusted operating income grew by CHF136 million organically, representing a 14% growth.
  • Record High Cash Generation: The company generated an outstanding free cash flow of CHF748 million, up by 24% compared to 2023, with a free cash flow conversion expected to remain above 50% in the medium term.
  • Margin Improvement and Efficiency Gains: The company's efficiency program has already significantly improved its margin this year, with a full effect to be reached by the end of 2025, and expects profitability to progress by at least 30 basis points in 2025.
  • Strategic Acquisitions and Innovation Focus: The company has signed 14 highly synergistic bolt-on acquisitions since January 2024, and is focused on innovation projects, including environmental testing and IMPACT NOW for sustainability, with a priority on small to mid-sized deals that bring scale and innovation to its services.
  • Guidance and Outlook: The company expects sales growth to be in the range of 5% to 7% in 2025, with bolt-on acquisitions adding another 1% to 2% of growth, and is confident in achieving its ambitious 2027 ESG targets, with a focus on margin-accurate and growth-accurate market segments beyond 2025.

Financial Performance

As Geraldine Picaud noted, "We settled on a 30 basis points margin guidance due to potential headwinds from macroeconomic or political events." This conservative approach is prudent, given the uncertain macroeconomic environment.

Growth Prospects

SGS is well-positioned to benefit from growth trends in the environmental sector, particularly in the US, and expects this trend to continue. The company's focus on small to mid-sized bolt-on acquisitions that bring scale and innovation to its services will also drive growth.

Valuation

With a PE ratio of 32.92, SGS is trading at a premium to its peers. However, its strong financial performance, growth prospects, and focus on margin expansion justify this premium. The company's free cash flow yield of 4.72% and ROIC of 12.72% also suggest that its valuation is reasonable. With a dividend yield of 3.3%, SGS offers an attractive total return profile for investors.

3. NewsRoom

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Tracking the Changing SGS Story as Analyst Sentiment Shifts with New Targets and Partnerships

Nov -29

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Are Business Services Stocks Lagging Rentokil Initial (RTO) This Year?

Nov -11

Source:

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United States Formulation Development Outsourcing Forecast Report 2025: An $18.11 Billion Market by 2033, Driven by Rising R&D Costs, Regulatory Complexity, and High Demand Across Key Pharma Hubs

Oct -28

Source:

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Is Steelcase (SCS) Outperforming Other Business Services Stocks This Year?

Oct -17

Source: zacks.com

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Is There An Opportunity With SGS SA's (VTX:SGSN) 40% Undervaluation?

Sep -29

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SGS (SWX:SGSN) Valuation: Assessing Shares After Expanded ESG Tech Alliance With Diginex

Sep -08

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Environmental Testing Market Company Evaluation Report, 2025 | SGS, Eurofins, and Bureau Veritas Lead with Global Reach, Environmental Testing Expertise, and Innovation-Driven Growth

Aug -05

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Testing, Inspection, and Certification (TIC) Market Company Evaluation Report 2025 | SGS, Bureau Veritas, and Intertek Lead with ESG Innovation, Digital Compliance Solutions, & Strategic Acquisitions

Aug -05

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.60%)

6. Segments

Industries & Environment

Expected Growth: 4.5%

SGS SA's 4.5% growth in Industries & Environment is driven by increasing demand for sustainability and environmental services, stringent regulations, and investments in digitalization and automation. The company's diversified portfolio, strong brand reputation, and expansion into emerging markets also contribute to its growth.

Natural Resources

Expected Growth: 4.2%

SGS SA's Natural Resources segment growth of 4.2% is driven by increasing demand for sustainable and responsible sourcing, stringent regulations and standards, and growing adoption of digital technologies for efficient resource management. Additionally, the segment benefits from the company's expertise in certification, testing, and inspection, enabling clients to ensure compliance and mitigate risks.

Connectivity & Products

Expected Growth: 5.5%

SGS SA's Connectivity & Products segment growth of 5.5% is driven by increasing demand for IoT devices, rising adoption of 5G technology, and growing need for cybersecurity solutions. Additionally, the company's expansion into emerging markets and strategic partnerships have contributed to the growth.

Health & Nutrition

Expected Growth: 4.8%

SGS SA's Health & Nutrition segment growth of 4.8% is driven by increasing consumer demand for healthy and sustainable products, stringent regulations and standards, and rising awareness of food safety and quality. Additionally, the segment benefits from the company's expertise in testing, inspection, and certification, as well as its strong presence in emerging markets.

Business Assurance

Expected Growth: 4.0%

SGS SA's Business Assurance segment growth of 4.0% is driven by increasing demand for risk management and compliance services, expansion into emerging markets, and strategic acquisitions. Additionally, growing concerns over supply chain resilience, cybersecurity, and ESG (Environmental, Social, and Governance) factors contribute to the segment's growth.

7. Detailed Products

Inspection Services

SGS provides inspection services to ensure the quality and quantity of goods during transportation, storage, and delivery.

Testing Services

SGS offers testing services to evaluate the safety, quality, and performance of products, including consumer goods, industrial equipment, and construction materials.

Certification Services

SGS provides certification services to ensure that products, systems, and processes meet international standards and regulations.

Audit Services

SGS offers audit services to evaluate the effectiveness of management systems, supply chains, and business processes.

Training Services

SGS provides training services to educate clients on industry best practices, standards, and regulations.

Digital Solutions

SGS offers digital solutions to support clients in their digital transformation, including data analytics, IoT, and blockchain services.

8. SGS SA's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for SGS SA is medium due to the availability of alternative inspection and testing services from competitors.

Bargaining Power Of Customers

The bargaining power of customers for SGS SA is low due to the company's strong brand reputation and the lack of concentration in the industry.

Bargaining Power Of Suppliers

The bargaining power of suppliers for SGS SA is medium due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants for SGS SA is low due to the high barriers to entry, including the need for specialized equipment and expertise.

Intensity Of Rivalry

The intensity of rivalry for SGS SA is high due to the presence of several established competitors in the industry, leading to a competitive market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 89.76%
Debt Cost 3.95%
Equity Weight 10.24%
Equity Cost 6.84%
WACC 4.24%
Leverage 876.69%

11. Quality Control: SGS SA passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Logista

A-Score: 7.4/10

Value: 7.0

Growth: 5.9

Quality: 5.8

Yield: 10.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Wallenius Wilhelmsen

A-Score: 5.8/10

Value: 9.2

Growth: 8.2

Quality: 7.9

Yield: 6.2

Momentum: 1.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Ipsos

A-Score: 5.6/10

Value: 7.8

Growth: 5.3

Quality: 6.7

Yield: 6.2

Momentum: 1.0

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
Bureau Veritas

A-Score: 5.5/10

Value: 3.7

Growth: 5.0

Quality: 6.0

Yield: 5.6

Momentum: 3.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
DKSH Holding

A-Score: 5.0/10

Value: 6.2

Growth: 3.3

Quality: 4.5

Yield: 6.9

Momentum: 1.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
SGS

A-Score: 4.8/10

Value: 1.6

Growth: 3.2

Quality: 5.5

Yield: 6.9

Momentum: 2.0

Volatility: 9.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

90.58$

Current Price

90.58$

Potential

-0.00%

Expected Cash-Flows