Wherever there are regulations, there’s almost always
some mechanism for ensuring compliance with them, and that has created
an enormous global market in testing, inspection, and certification (or
TIC). The largest player in a fragmented market, Switzerland’s SGS (OTCPK:SGSOY)
(SGSN.S) not only helps companies stay in compliance with all manner of
laws and regulations, but also help ensure product, process, and system
quality, safety, and performance. The range of services SGS offers runs
the gamut from testing corn shipments to refinery process optimization
to auto emissions testing to testing electronics and toys for safety.
SGS
is the leading player in a field with attractive growth
characteristics, and the company has a decent track record of free cash
flow generation, but management has established an unfortunate recent
track record of over-promising and under-delivering on margin
improvement, and the shares look pretty richly-valued even factoring in a
relatively more stable trajectory for earnings.
Read more here:
SGS Needs To Verify Its Own Self-Improvement Processes
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