Video

#SaxoStrats
Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Medium term
Trade view / 18 April 2016 at 13:45 GMT

#SaxoStrats: Eurofins Scientific seen with upside

Head of Equity Strategy / Saxo Bank
Denmark
Instrument: EUFI:xpar
Price target:
Market price:
Saxo Strats banner
 
Background

Since 2013, Paris-listed Eurofins Scientific (EUFI:xpar) has taken market share and shown robust revenue and EBITDA growth. Capex will slow down over coming years, accelerating cashflow generation, and this could lead to higher multiples.

Eurofins Scientific share price performance
 











Source: Bloomberg, Saxo Bank

Eurofins is  trading at 12-month forward P/E ratio of 26.9, compared with 18.5 for global commercial services companies. Compared with its three publicly listed competitors (SGS, Intertek and Veritas), Eurofins also trades at a premium (around 20%), but that is warranted given its market share gains and leading position. Nevertheless, in view of the outlook for revenue growth, valuation multiples could expand further.

Eurofins valuation
 











Source: Bloomberg, Saxo Bank


Eurofions table
 














Management and risk description

Buy Eurofins Scientific (EUFI:xpar) at market with a trailing stop.

Key risks: stronger EUR against USD, with around 33% of revenue coming from  North America; increased competition, especially pharma/biotech, which is a very lucrative market, higher-than-expected capex needs.


Parameters

Entry: Buy the stock at market with a trailing stop

Trailing stop:  €293.50 (volatility based), with step size of €3

Target: €400

Time horizon: Medium term


— Edited by John Acher

Non-independent investment research disclaimer applies. Read more

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