Low capital intensity

Capex (capital expenditure) should be distinguished from Opex (operating expenditure), which are recurring costs incurred to maintain the company's activity. These operating expenses may include salaries, maintenance, leasing costs or current expenses.

A high Capex may indicate a focus on growth and expansion, while a moderate Capex may reflect a more cautious approach or a consolidation phase. However, a high Capex may also indicate the highly capital-intensive nature of a business sector, and conversely, a low Capex may indicate the light capital-intensive nature of a business model.

To be considered a low-capital-intensity company, the capex/sales ratio must be below 10% and the capex/EBITDA ratio must be below 20%.

So-called capex-light companies (i.e. those with low capital intensity, i.e. low capex in relation to their sales and EBITDA in particular) have several advantages over more capital-intensive companies, including reduced capital requirements and therefore more liquidity available for strategic allocation, higher profit margins and better profitability, greater flexibility to seize opportunities and new markets and therefore greater capacity for innovation.

Historically, low-capitalization companies have outperformed their peers and the market average. This generally applies to technology, medical equipment, pharmaceuticals, consumer goods, beverages, food, tobacco and IT services. Conversely, capital-intensive sectors tend to include automotive, mining and metallurgy, telecoms, oil and gas production, and utilities. Light" industries have thus outperformed "heavy" industries from the 1990s to the present day, and this gap has widened since the 2008 financial crisis.

This investment style list identifies companies with low capital intensity that are likely to outperform the market average over the long term.