Narrow-Moat SGS' Full-Year Results Pass Muster

Narrow-moat SGS, the first of the large testers to report full-year results, proffered up a solid, well-signposted set of numbers. Organic revenue declined by just 6.5%, highlighting the resilience and flexibility inherent in the testing, inspection and certification, or TIC, model, during the toughest period in memory. For comparison, revenue actually continued to grow organically during the global financial crisis. Although disposals and adverse foreign-exchange movements drove headline revenue and operating profit down 15%, the incremental improvement over the last number of quarters has done enough to comfort investors. So much so, in fact, that the share price has more than recovered to precoronavirus levels, materially above our CHF 2,100 fair value estimate. As such, we do not believe they offer value at current valuations.