CTT Systems

In one line: Trading 43% below its 200-week average and simultaneously more expensive than it was at peak earnings — the decline is a bubble unwinding, not a discount.

An aircraft humidity-control specialist, SEK 1.6bn, that appeared attractive because it looked heavily sold off. It is not cheap.

Every quality input has inverted. Return on capital fell from 41% to 15%. Free cash flow has gone to essentially nothing while capital expenditure ramps — SEK 30m in a single quarter on a facility expansion, partly debt-financed. And the valuation moved the wrong way: 23.2× market cap to EBIT at the 2023 earnings peak, 33.3× today. You are paying more for 60% less profit.

The bull case is genuine but is a 2027 story: original-equipment revenue up 125% year on year, described as the best quarter since early 2020, guided to 45–60% growth on rising wide-body build rates. Set against that, management has downgraded the private-jet segment to the weakest year in several, and earnings per share still fell 34% in the quarter.

At 33× trailing EBIT there is no margin of safety if the airframe ramp slips, and airframe ramps are the most reliably slipping schedules in industrials. The screen credited this business with a 30% median return on capital; that median was measured across years that have already ended.