NATL: Hold + Reduce
Published 16 Sep 2026, 16:36 BST. This is the frozen version, not the current recommendation.
Why this assessment was issued
Stored financial statements changed; the revised figures need checking. The model version changed. The published model version has been replaced. Record the new calculation basis even if the rating is unchanged. The central target is 13.5% below the price. The stronger case offers 64.3% upside, exceeding the central downside; the negative view is qualified.
The central target is 13.5% below the price. The stronger case offers 64.3% upside, exceeding the central downside; the negative view is qualified.
Supporting evidence
Year-to-date profit has improved
Across 2 completed quarters since 2025-12-31, net income was 87.0m versus 53.0m in the matching prior-year periods (USD). Check whether the latest quarter changes that direction.
The stock is leading its sector
Over one year, the stock changed +20.3% against -30.7% for Technology (XLK). The gap is +51.1 percentage points. These are price returns, before dividends.
Opposing evidence
Capital spending changes the cash picture
Operating cash covers 1.41 times profit, but cash after capital spending covers 0.80 times. Cash generation is stronger before the investment bill is paid.
Interest cover is thin
Debt less cash was 2,507.0m at 2026-06-30. Operating profit covered interest 2.0 times.
The original scenarios
| Scenario | Sales growth | Profit margin | Model value |
|---|---|---|---|
| Weaker | -0.8% | 6.6% | $13.79 |
| Central | 4.2% | 8.6% | $40.35 |
| Stronger | 9.2% | 10.5% | $76.60 |
Method: Cash flow across the cycle. Loss periods, gaps or differences in the earnings basis make P/E less useful here. This assessment uses operating profit, capital spending and the balance sheet instead. Loss years remain in the margin history. The earnings method could not pass its required checks; the cash-flow method passed its own input checks. These scenarios are not probability intervals.
Original assumptions and checks
| tax | 15.021459227467812 |
|---|---|
| price | 46.62 |
| years | 1.212867898699521 |
| claims | 0.0 |
| growth | 4.2222790448857905 |
| margin | 11.450554424077845 |
| profit | 196000000.0 |
| shares | 73896934.0 |
| cash_ok | True |
| debt_ok | False |
| growths | [4.473438956197584, 3.971119133573997, 6.537282941777334, 0.09074410163338875] |
| revenue | 4419000000.0 |
| discount | 8.355895272823265 |
| downside | 70.41507111560139 |
| interest | 259000000.0 |
| leverage | 3.8176694604602024 |
| net_debt | 2507000000.0 |
| terminal | 2 |
| free_cash | 157000000.0 |
| ppe_ratio | 0.11857886399637928 |
| buy_hurdle | 20 |
| extra_debt | 0 |
| volatility | 21.624320894581565 |
| basis_notes | [] |
| capex_ratio | 0.027155465037338764 |
| cash_profit | 196000000.0 |
| share_ratio | Not available |
| annual_years | 5 |
| capital_cost | {'tax': 15.021459227467812, 'beta': 0.7385141387406412, 'debt': 2936000000.0, 'beta_end': '2026-09-11', 'discount': 8.355895272823265, 'debt_cost': 8.821525885558582, 'risk_free': 4.96, 'beta_start': '2023-10-20', 'beta_weeks': 152, 'source_url': 'https://home.treasury.gov/resource-center/data-chart-center/interest-rates', 'debt_weight': 46.0110556759829, 'equity_cost': 9.088380462468804, 'equity_value': 3445075063.08, 'adjusted_beta': 0.8256760924937607, 'credit_spread': 1.5, 'equity_premium': 5.0, 'risk_free_date': '2026-09-11', 'observed_interest': 8.821525885558582} |
| depreciation | 6.291016066983481 |
| normal_capex | 6.291016066983481 |
| tax_measured | True |
| current_capex | 2.7155465037338766 |
| working_ratio | 0.0 |
| financial_date | 2026-06-30 |
| interest_cover | 1.4620979062951724 |
| operating_cash | 277000000.0 |
| terminal_share | 78.3287624918007 |
| reporting_basis | quarterly |
| uncapped_growth | 4.2222790448857905 |
| projected_margin | 8.569435567559395 |
| capital_inventory | {'date': '2026-06-30', 'values': {'total_current_assets': 1848000000.0, 'total_current_liabilities': 1802000000.0}, 'version': 'capital-scope-3', 'currency': 'USD', 'evidence': {'total_current_assets': [{'end': '2026-06-30', 'unit': 'USD', 'value': 1848000000.0, 'financial_period_id': 5619641}], 'total_current_liabilities': [{'end': '2026-06-30', 'unit': 'USD', 'value': 1802000000.0, 'financial_period_id': 5619641}]}, 'conflicts': []} |
| cash_profit_basis | Reported net profit |
| historical_margin | 8.569435567559395 |
| year5_value_share | 78.3287624918007 |
| depreciation_ratio | 0.0629101606698348 |
| net_debt_at_target | 2507000000.0 |
| non_operating_assets | 0 |
| non_operating_profit_material | False |
Recent price · Passed. Weekly close dated 2026-09-11.
Current financials · Passed. Statements through 2026-06-30; factor prices dated 2026-09-11.
Price risk · Passed. Risk uses the latest 52 weekly price changes.
Operating history · Passed. 5 annual results, retaining operating losses and unusually strong years.
Quarterly operating results · Passed. Four quarters through 2026-06-30.
Cash-flow and ownership inputs · Passed. Capital spending, depreciation estimate, operating capital, debt, cash and other ownership claims are recorded.
Depreciation basis · Passed. Four matching quarters of operating income and reported depreciation are required. An unrelated EBITDA-minus-EBIT difference is not treated as depreciation.
Matching currency · Passed. USD statements and share price.
Operating totals · Passed. Quarterly sales and operating profit agree with the trailing snapshot within 5%.
Operating discount rate · Passed. The operating cash-flow discount rate needs a current USD Treasury rate, at least two years of matching market returns, and dated debt and share inputs. An equity return hurdle is not used as the company's funding cost.
Continuing growth and funding cost · Passed. The funding cost must exceed continuing growth in every valuation scenario.
Scenario consistency · Passed. The weaker, central and stronger assumptions must give an ordered range. When growth costs more capital than it earns, a tailored operating review is required before publishing a target.
Target publication review · Passed. The model estimate is within SM's automatic publication range of one quarter to four times the current price. This is a review threshold, not evidence that the market price is correct.
Cash-flow value dependence · Passed. Cash flows beyond year five account for 78.3% of the absolute present value. This is within SM's 90% automatic publication limit.
Investment assets and operating capital · Passed. No material unvalued investment balance was identified in the available capital inventory. This does not establish that every asset has been independently appraised.
Policy sm-review-2-research · Model sm-assessment-14-operating-capital · Data 2d2c787193d1.