ATCO-A.ST — mttssn research

HOLD

Conviction: MEDIUM

A premier global quality compounder — 21% ROIC, +SEK 17.1B economic profit, a decentralised innovation/aftermarket machine across compressors, vacuum and industrial tools — but fully valued: the reverse-DCF implies ~5.8% perpetual growth. Quality you accumulate, not chase. HOLD.

Adj. ROIC

21.2%

WACC 8% → spread +13.2pp

Economic Profit

+SEK 17,097M

+SEK 17.1B; exceptional franchise

FCF Yield

n/a

Strong; funds dividend + M&A

Price / Target

SEK 182 → SEK 185

+1% base; HOLD

Revenue (LTM)

n/a

LTM; compressors/vacuum/tools

EBIT Margin

n/a

GAAP; aftermarket-rich

EV / IC

7.00×

Enterprise value / invested capital

Net Debt

SEK 19.3B

Modest; investment grade

Thesis

Atlas Copco is one of the world's highest-quality industrials: global leadership in compressors, vacuum technology, industrial tools and power, a large high-margin aftermarket, a decentralised entrepreneurial culture and a decades-long record of value creation. Adjusted ROIC of 21% and +SEK 17.1B economic profit confirm an exceptional franchise. (This deep-dive sits on the protected manual extraction.)

Quality this visible is never cheap: the reverse-DCF's −51% is a harsh-perpetuity artefact, and the price embeds ~5.8% perpetual growth — defensible for a compounder with pricing power, semiconductor/vacuum exposure and an aftermarket annuity, but offering no margin of safety.

Valuation · reverse-DCF & scenarios

With 21% ROIC the single-year perpetuity badly understates value; the price embeds ~5.8% growth — fair for the franchise. Own for the compounding and aftermarket annuity, not a re-rating.

Base SEK 185 (flat); bull SEK 220 (semiconductor/vacuum recovery + pricing + aftermarket growth); bear SEK 145 (an industrial/semis downturn compresses orders and the multiple).

Market-implied growth

≥20.1%

model ceiling — EV implies more than constant-ROIC sustains

No-growth value / share

SEK 82

45% of price; rest = priced-in growth

ROIC − WACC

+13.2 pp

ROIC 21.2% vs WACC 8.0% — positive = value creation

CAP (priced-in)

8.7 yrs

years of excess returns the price implies (fades to WACC)

At today’s enterprise value the constant-ROIC reverse-DCF maxes out: even at its sustainable-growth ceiling (~20.1%, limited by ROIC 21% ≈ WACC 8%) it cannot reach the current EV. No-growth value is SEK 82/share (45% of price); the market prices in growth and/or a higher ROIC than booked — richly valued on this lens. Read the sensitivity grid.

Scenario	24m target	Impl. g	Upside	Prob.	Driver
Bull	SEK 220	≥20%	+21%	30%	Semis/vacuum recovery + pricing + aftermarket
Base	SEK 185	≥20%	+1%	45%	Fair: ~5.8% implied growth, compounder
Bear	SEK 145	+18%	-21%	25%	Industrial/semis downturn compresses orders
Prob-weighted	SEK 186	—	+2%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at WACC × growth

WACC \ g	0%	3%	5%	8%	10%	15%
6.50%	113	126	135	151	162	194
7.25%	95	105	113	125	134	158
8.00% (base)	82	90	96	106	113	133
8.75%	72	79	84	92	98	114
9.50%	64	70	74	81	86	99

Green = fair value above the current price of SEK 182.40. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.

Method & data. NOPAT SEK 27,470, invested capital and ROIC 21.2% are observed (adjustments.json); WACC 8.0% and terminal g 2.5% are assumptions. EV→equity uses net debt SEK 19,283. The model holds ROIC constant (no fade) over the explicit horizon; the CAP figure instead fades excess returns to WACC.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Aftermarket annuity

A large, high-margin service/aftermarket base provides recurring, resilient revenue.

2. Vacuum / semiconductor exposure

Leading vacuum technology leverages the long-term semiconductor capex cycle.

3. Decentralised innovation

An entrepreneurial, decentralised model drives consistent innovation and pricing power.

4. 21% ROIC compounding

Exceptional returns plus disciplined M&A compound value through cycles.

5. Global scale

Diversified end-markets and geographies smooth cyclicality.

Key risks

Full valuationPrice embeds ~5.8% perpetual growth; no cushion.
Industrial/semis cyclicalityCompressor and vacuum demand track industrial and semiconductor capex cycles.
FXLarge international exposure adds currency sensitivity.
China/short-cycleShort-cycle orders (notably China) can soften quickly in a downturn.
Multiple normalisationA de-rating from premium multiples is a meaningful downside.

Conclusion

Atlas Copco is a premier quality compounder at a full price. HOLD, medium conviction; base target SEK 185 (flat) — a core holding to accumulate on industrial-cycle weakness rather than chase.

A semis/industrial pullback toward the mid-SEK 140s would offer a better entry into the franchise.