Intrinsic Value Schlatter Industries AG (STRN.SW)

• Previous Close: CHF19.40
• Intrinsic Value: CHF8.30
• Upside potential: -57%

Stock Valuation Context

Business Model And Market Position

Schlatter Industries AG operates in the industrial machinery sector, specializing in welding systems and weaving machines for global markets. The company’s core revenue model is driven by manufacturing high-precision machinery, including welding systems for reinforcing mesh and industrial applications, as well as weaving machines for press fabrics and industrial filters. Its product portfolio spans wire straightening, cutting, and crimping machines, alongside software solutions like MeshStudio for 3D wire mesh design. Under the Jäger brand, Schlatter serves niche markets such as rail welding and screen assembly, positioning itself as a specialized provider of industrial equipment. The company’s market position is bolstered by its long-standing expertise, dating back to 1916, and its ability to cater to both new and used machinery segments. While it faces competition from larger industrial machinery firms, Schlatter’s focus on precision and customization allows it to maintain a stable presence in targeted industrial applications.

Revenue Profitability And Efficiency

In its latest fiscal year, Schlatter reported revenue of CHF 113.2 million, with net income of CHF 1.5 million, reflecting modest profitability. The diluted EPS stood at CHF 1.4, indicating stable earnings per share. However, operating cash flow was negative at CHF -7.5 million, partly due to capital expenditures of CHF -1.9 million, suggesting reinvestment needs. The company’s ability to convert revenue into cash remains a point of scrutiny.

Earnings Power And Capital Efficiency

Schlatter’s earnings power appears constrained, with net income representing a slim margin relative to revenue. The negative operating cash flow highlights challenges in working capital management or timing differences. Capital expenditures, while not excessive, indicate ongoing investments in maintaining or upgrading machinery, which could support future efficiency but weigh on short-term liquidity.

Balance Sheet And Financial Health

The company maintains a conservative balance sheet, with CHF 2.7 million in cash and equivalents against total debt of CHF 5.2 million, suggesting manageable leverage. The modest debt level and equity base reflect a balanced financial structure, though the negative operating cash flow warrants monitoring for liquidity risks, especially in cyclical downturns.

Growth Trends And Dividend Policy

Growth trends appear muted, with revenue and net income reflecting steady but unspectacular performance. The company pays a dividend of CHF 1 per share, signaling a commitment to shareholder returns despite its smaller scale. Future growth may hinge on niche market expansion or technological advancements in its welding and weaving systems.

Valuation And Market Expectations

With a market capitalization of CHF 25.4 million, Schlatter trades at a low multiple relative to its earnings, reflecting its small-cap status and niche focus. The beta of 0.186 suggests low volatility, aligning with its stable but limited growth profile. Market expectations likely remain tempered given its specialized industrial exposure.

Strategic Advantages And Outlook

Schlatter’s strategic advantages lie in its specialized machinery and long-term industry presence, which provide resilience in niche markets. The outlook depends on its ability to innovate within welding and weaving technologies while managing cash flow constraints. A focus on high-margin custom solutions or aftermarket services could enhance profitability over time.

Sources

Company description, financial data from public filings, and market data from the Swiss Exchange (SIX).