Company & Sector Research
Europe
Forensic Alpha maintains its highest risk score (10/10) on STLAM, citing aggressive use of its balance sheet and financing JVs to offset declining shipments and boost reported industrial performance. Sales to related-party JVs surged 50% Y/Y to €7bn (now over 10% of total sales), while receivables from JVs rose €1bn in six months to €3.2bn. STLAM also sharply expanded its Financial Services balance sheet, with €4.4bn in H1 outflows excluded from its preferred “industrial FCF” metric, which was already negative €3bn. This includes €2.8bn for the purchase of leased vehicles and €1.7bn in dealer/retail financing. If macro conditions don’t improve, STLAM’s rising financial risk could leave management with little choice but to pursue more drastic restructuring.
H1 revenue rose 35% (+17% organic), with ELIX achieving five record revenue months and maintaining margins in line with recent years. While management expects FY25 results to meet market expectations, analysts have nudged estimates higher. Willis Welby sees ELIX as an interesting cross between a quoted company and a partnership - combining a proven consulting growth model with disciplined, selective M&A. Momentum remains strong, yet despite a recent share price rebound, the implied to Y3 EBITM ratio is still only 34. Given this disconnect, they see potential for up to 70% upside from current levels.
North America
John Zolidis reiterates his bearish view on CAKE, warning that the multi-year tailwind from aggressive menu price hikes is ending. From 2023-2025, the company raised prices by over 20%, boosting restaurant-level margins to an 8-year high despite a ~5% decline in traffic. However, pricing is set to decelerate to 3.5% in 2H25 (vs. 4.0% in H1) and that slowdown doesn’t account for the rollout of new, lower-priced menu items. Meanwhile, non-core concepts continue to dilute margins, reducing consolidated RLM by 170bps in Q2. After reviewing Q2 results, which featured a 1.2% comp and 7% EPS growth (the slowest in 3 years), John sees little justification for the stock’s 30% rally over the past 3 months.
CEO Tom Polen’s leadership has damaged BDX’s culture and weakened long-term performance, according to Paragon Intel, whose analysis includes interviews with former senior executives, who worked with Polen for more than 51 years combined. Critics described him as an overconfident micromanager, too reliant on loyalists and resistant to course-correct when bold initiatives underperform. His emphasis on appearances and short-term results strained organisational culture, led to talent attrition and undercut long-term innovation. Under his tenure, BDX’s stock has declined 28%, destroying over 70% alpha. The group would be better served by a leader with stronger executional discipline and cultural stewardship.
BTN flags deteriorating financial quality despite headline beats. Receivables have surged, with DSOs breaking past 100 days (106.4 in Q2) - up 5 days sequentially and 20 days Y/Y. Sales growth previously stalled when DSOs hit 92. 1 DSO equals ~$12.7m in revenue and every 2-day increase adds ~1¢ in adjusted EPS. Despite a $51m YTD revenue beat, DXCM only raised FY25 guidance by $25m and cut its gross margin outlook from 64-65% to 62%. Operating margin guidance of 21% also looks aggressive (Q1: 13.8%, Q2: 19.2%). Finished goods inventory remains low at 25.8 days and DPOs have been stretched by 30 days over two years. While EPS is benefitting from buybacks, BTN questions if cash flow can sustain them.
A publicly traded specialty physician practice delivering significant and highly predictable cashflow. With a nationwide focus on neonatal and paediatric care, MD stands to benefit from rising preterm birth rates and increasing demand for complex infant care. Despite these defensive and attractive characteristics, MD trades at just 8x P/E and 7x EV/EBITDA - over a 50% discount to the S&P 500. In recent years, private equity buyers have paid a median 13x EV-to-EBITDA for similar assets. Even a modest multiple re-rating could unlock significant upside - each 1x EV-to-EBITDA multiple improvement would equate to ~$2.75 boost in MD’s share price.
ATRL’s stock has surged ~325% over the past three years, supported by a sixfold increase in its nuclear backlog to $5.2bn. In his latest report, Dimitry Khmelnitsky assesses the group's long term nuclear growth prospects. He views management’s $15bn CANDU refurbishment revenue forecast through 2050 as realistic. However, on new builds, he estimates a more modest opportunity of $650m-$1.9bn in average annual revenue and $90m-$270m in annualised adjusted EBITDA - well below management’s ~$900m EBITDA projection. Dimitry cites political resistance, high transition costs and global competition as key constraints, with Canada representing the most viable growth potential.
Hamed Khorsand raises his price target on HWKN to $200 (from $160) following a strong Q1 beat and growing momentum across all 3 business segments. Water treatment is now the company’s largest division and the recent acquisition of WaterSurplus enables HWKN to cross-sell equipment alongside chemicals, with synergies expected to materialise in the coming quarters. The newly realigned Food & Health Sciences segment is also positioned for growth, supported by a broader product offering. Hamed lifts his FY26 EPS forecast to $4.60 and anticipates continued strength in FY27. With positive FCF, expanding gross margins and rising demand, HWKN has meaningful upside potential from current levels.
Emerging Markets
Multinationals In China: Consumer caution persists
A year after the pro-growth signalling from Beijing, most consumer sector multinationals still report subdued household spending in China. Elevated household savings and low consumer confidence - echoed by both luxury and FMCG players - suggest that the recovery has yet to reach full momentum. Weakness is most apparent in discretionary categories, particularly luxury and F&B. Kering reported high-20% sales declines among Chinese consumers, while Unilever and AB InBev flagged weak foodservice volumes. Even Hermes, conceded that momentum is lacking and noted a "wait-and-see" mindset, despite modest growth. Looking ahead, unless a shock-and-awe stimulus package arrives, 86Research expects a gradual, selective recovery rather than a broad consumption rebound.