Swiss Small and Midcap "Deep dive on FCF ROIC and productivity analysis ..."

Research evidence excerpt

Swiss Small and Midcap "Deep dive on FCF ROIC and productivity analysis ..."

Swiss Small and Midcap UBS Research

Key conclusionS

We screened the majority of the Swiss small and midcap companies under UBS coverage

for key shareholder value metrics including FCF ROIC (including goodwill even if offset

against equity under Swiss GAAP FER) and productivity progress (EBIT/ employee) over

the last five years. We also highlight companies where we forecast the strongest

incremental improvements between 2025-28E.

Industry-leading companies (technology, innovations, unique selling position, non- Management execution is an

commodity products) in niche markets often score best on observed value creation important factor. Timing of

metrics. Like in our previous deep dives on this topic, company rankings are not investments can also impact these

clustered to certain industries/end-markets (e.g. we have companies of the same key metrics

industry being ranked in the first and fourth quartile), which can reflect that different

management executions can impact the pace of value creation. Interestingly, some

companies may be top performers in one category and perform poorly in the other,

which might be due to timing differences created by investments (as higher investments

can lead to higher EBIT but lower EFCF), among others.

Other companies feature either towards the top or bottom end of the table, depending Stadler Rail FCF ROIC profile is highly

on the cycle. For example, Stadler Rail ranks number 4 on FCF ROIC trailing 5 year basis. dependent on the working capital

But this includes a long, 3-year cash release cycle where the company released a total of cycle

CHF1.2bn of working capital. Presently, Stadler Rail is again in a WIP working capital