Analysis of Switzerland stock market

When we look at Swiss companies under consideration for our analysis, we realize that almost all of these companies have scored profits in 2012 except for one which is UBS, a financial services firm, only managing to get a negative return on equity of (5%). On the contrary, Roche has outperformed all other Swiss companies in terms of return for the shareholders, as it has the highest return on equity of 58.42% in the Swiss market. Following is the list of companies that are listed on Switzerland stock exchange market, arranged in ascending order with respect to their ROE:

swiss stock market, fundamental research

Higher ROE’s for midcaps

If we look at above table we can observe that companies earning higher return on equity are all middle cap companies. These companies have average solvability ratios and offer reasonable dividend yield to their shareholders. On the other hand, large cap companies like Nestle and Novartis have presented average results when we consider them in comparison with other companies, and have healthy capital structure ratio.

Clariant, Givaudan, Actelion and Richemont have the highest Shiller P/E in their mentioned order. Richemont is a middle cap company, whereas other three companies are small cap companies. Their higher Shiller P/E could be reflection of the fact that shareholders/market expects a better performance from these companies in the future, and that is why they are willing to pay a much higher share price in relation to the earnings of these companies.

Varying dividend returns

When we see dividend yield of different companies, we realize that it is more or less same for all the companies and is not affected by return on equity. Furthermore, large, small and middle cap companies in Swiss market are offering approximately same dividend yield to their customers. On average companies offered dividend yield of 2.55% in the year 2012. Zurich Insurance has provided highest dividend yield of 6.72% to its shareholders in 2012, but this reward is also attached with the risk of weak capital structure of the company, with one of the lowest equity to total asset ratio of 8.43% in the Swiss market. It also has the 2nd lowest Shiller P/E of 9.51 in the Swiss market which is understandable given its poor solvability.

Most of the companies enjoy good solvability ratios with average equity to total asset ratio of 38.03% at the end of 2012. Swatch has the most stable capital structure when compared with other companies under question, with equity to total asset ratio of 83.27%. The two companies with lowest return on equity, i.e. UBS and Credit Suisse, also have the poorest solvability ratio in the sector with equity to total asset ratio of 3.99% and 3.84%, respectively. One of the reasons for the poor return on equity of these companies has been their poor solvability.