Schneider Has Put The Pieces In Place To Drive Higher-Value Growth

Relative to what investors seem willing to pay for companies like Rockwell (ROK), Emerson (EMR), and Yaskawa Electric (OTCPK:YASKY), I'm starting to wonder if Schneider Electric (OTCPK:SBGSY) isn't in some respects an overlooked contender in some attractive markets. Not only is Schneider a leader in energy management (and with a relatively attractive mix), but it is also a strong player in both discrete and process automation and well-positioned for what looks to be a growing convergence between hardware and software in automation.

Schneider isn't exceptionally cheap, but in a market where many high-quality industrial names are quite expensive, it still looks like an interesting relative laggard on valuation. I'd really like to see a stronger ROIC here, and I believe that at least partly explains the valuation, but low-to-mid single-digit organic revenue growth can support a decent return from here.

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Schneider Has Put The Pieces In Place To Drive Higher-Value Growth

Dassault Looks Well-Placed For The Next Era Of Manufacturing, But Valuation Is Problematic

French PLM software leader Dassault Systemes (OTCPK:DASTY) is part of the reason I’m much too gray for somebody in their 40s – while I love the business that the company is in, and its leverage to the ongoing “digitalization” of the manufacturing sector, the valuation is pretty brutal for someone who considers themselves a GARP investor. Although I think investors who put more emphasis on the “Guh” part will be happy with the growth that Dassault delivers in the coming years, the valuation is just too much of a sticking point for me right now… even though it really won’t surprise me if I’m reading this three years from now and thinking, “man… I should have just bought it anyway”.

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Dassault Looks Well-Placed For The Next Era Of Manufacturing, But Valuation Is Problematic

Schneider Electric Still Not Getting Full Marks For Its Performance

The performance of French automation and electrical equipment manufacturer Schneider Electric (OTCPK:SBGSY) (SCHN.PA) remains a little confounding. The company has been producing good growth recently in comparison to peers/rivals like ABB (ABB), Eaton (ETN), Emerson (EMR), and so on, but the share price performance over the last year hasn’t been all that impressive – a little better than ABB and in line with Eaton, but certainly nothing special next to Rockwell (ROK), Emerson, or Honeywell (HON).

Of course, one-year performance numbers can only tell you so much, and comparisons to conglomerates like Honeywell aren’t entirely fair, but Schneider’s recent performance doesn’t seem to reflect much confidence in the company’s outlook.

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Schneider Electric Still Not Getting Full Marks For Its Performance

Seeking Alpha: Hexagon Looks To Find New Applications For Market-Leading Technologies

Positioning and measurement technologies don't often get all that much attention, even though they're essential to a wide range of industries. With that, Sweden's Hexagon AB (OTCPK:HXGBY) may be one of the more obscure $10 billion-plus companies out there. Even so, this company is leader across its markets and is in the early stages of a transition from a hardware-centric capital good company to a software-driven technology company that can offer integrated positioning, measurement, design, and planning products to a wide range of industries.

It's hard to call Hexagon AB cheap right now, but then none of its peers really are either. Hexagon's core markets often long-term growth rates in the mid to high single digits, with significant margin leverage potential with the shift towards more software and services in the mix. Given growth potential well above the norm, I don't think Hexagon is overpriced today and I believe these shares offer attractive leverage to markets like smart agriculture, energy, construction, emerging market manufacturing, and 3D printing.

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Hexagon Looks To Find New Applications For Market-Leading Technologies