Companies reorganising their legal, operational and ownership structures are set to outperform this earnings season, as they increase productivity and generate value.
Credit Suisse has identified seventeen companies, including Boral, Crown and Computershare, that are in the "post-acquisition cost synergising phase" meaning they are in prime position to embrace increased cash flow.
"Many of our restructuring candidates for 2017 are the types of stocks that previously performed well during earnings expansions," writes Hasan Tevfik, head of equity research at Credit Suisse.
"They are lowly valued. They are under-earning. They are cyclical. Successful execution of the restructuring should be yet another reason why they may outperform."
Mr Tevfik's research team points to the likes of Fairfax, IOOF, Myer and Speedcast, as well as Boral, Crown and Computershare as those which currently trade at a discount, but expect to generate considerable free cash-flow thanks to their corporate streamlining.
Fifty companies reported either cutting costs, selling or de-merging assets, repositioning their businesses or paying down debt in 2016, with Credit Suisse pointing to these 17 those the market is underestimating.
"Our 17 restructurers trade at a discount to the market on a 12-month forward P/E (14 vs 16.5) and in line on dividend yield of 4.6 per cent and free cash flow yields of 7.1 per cent," writes Credit Suisse.
"Importantly, Credit Suisse analysts forecast our restructurers to generate 24 per cent earnings-per-share growth and 42 per cent free cash flow growth."
Cost cutting is by far the most popular restructuring practice with the likes of Aurizon, Boral, Computershare, Fairfax Media (owner of The Australian Financial Review), IOOF, JB Hi-Fi, Metcash, Myer, Speedcast, Treasury Wines, Vocus Communications and WPP all stripping out unnecessary costs in their business.
ANZ and Automotive Holding Group have sold off assets, with Mr Tevfik speculating there may be further divestments in Automotive Holding Group in the near future.
Crown has repositioned itself as a pure casino play, enacting a sharp about face from its previous business strategy. The company has also savagely reduced debt, allowing for additional balance sheet capacity for a 3-4 per cent share buyback.
JP Hi-Fi is tipped to completed the $870 million acquisition of The Good Guys in early 2017 and also dramatically reduced its debt levels.
Myer announced it will focus on more high-end customers, qualifying it for inclusion in Credit Suisse's restructure screen.
Historically, Australian companies have been less inclined to dramatically restructure their businesses, however more than 25 per cent of companies restructured their operations last year, compared with just 15 per cent in 1999.
And while resource companies are well-renowned for stripping out unnecessary costs and reorganising their businesses in a commodity downturn, the analysts have found only Origin Energy represents the mining and energy space.
Credit Suisse has added Computershare to its Long portfolio, removing Primary Health Care.