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Investing.com - BNP Paribas Exane upgraded SGS SA (SIX:SGSN), a $20.5 billion testing and certification giant with a stable beta of 0.57, from Neutral to Outperform and raised its price target to CHF98.00 from CHF88.50.
The upgrade reflects BNP Paribas Exane’s view that the market is undervaluing SGS’s self-help initiatives that are gaining momentum and positioned to deliver industry-leading margin expansion. According to InvestingPro analysis, SGS currently maintains a solid 43.95% gross margin and has demonstrated remarkable stability with 26 consecutive years of dividend payments.
The research firm highlighted SGS’s recent acquisition of ATS in the United States as a strategic move that opens new growth opportunities and makes the company an attractive investment for exposure to a potential U.S. non-destructive testing (NDT) market upswing. With a moderate debt level and an overall "Fair" financial health score from InvestingPro, the company appears well-positioned to execute its expansion strategy.
BNP Paribas Exane projects SGS will exceed its own 2027 margin target of 16.2%, forecasting margins above 17% from approximately 2027 onward, which places their estimates about 80 basis points higher than current consensus.
The firm attributes its more optimistic outlook to a combination of factors including existing efficiency measures, improved operating leverage, additional cost savings, and synergies from the ATS acquisition—elements they believe are not yet fully reflected in market consensus.
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