In our view, NWG will be able to deliver strong EBITA growth for a long period, compounding through reinvesting FCF from its cash-generative roof felt business in M&A at attractive returns. It is currently trading at 12x EV/EBITA ‘22e, compared to M&A compounders (Lifco, Indutrade, Lagercrantz, Addtech) at 28x EBITA. Note that NWG has delivered 15% EBITA CAGR over the past five years (7% CAGR from M&A), in line with M&A compounders.
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