7 companies that are in serious danger of being upended by the competition

upended

Disrupting a whole business sector is the goal of many startups. Uber, Amazon, and Tesla all disrupted their sectors, and a lot of media attention has been spent analyzing them.

The companies on this list are those on the other side of the table — in danger of being disrupted by a startup, or savvy competitor, as well as being expensive relative to the market.

An analysis by Credit Suisse looked at disruption-prone companies "to be cautious on." To determine which businesses are the most susceptible to disruption, Credit Suisse looked at the impacts of globalization, innovation, and regulation on companies and found the businesses whose returns are most susceptible to changes in those areas.

The companies were then sorted using a cash-flow return-on-investment (CFROI) analysis, which looks at the value of a company's assets over time and compares that to the company's skill at investing its money smartly, as represented by its cost of capital.

Simply put, if a company's investments are returning more money than they cost, then the company is probably doing well and will stay off this list. The companies are listed with the percent chance of achieving the CFROI implied by the market, or the probability that the company is able to live up to market expectations.

This number was calculated by looking at other analyst predictions and comparing them to Credit Suisse's predictions for cash flow.

The following seven companies are in danger of being disrupted and have poor CFROI ratios. Read on to find out which made the list:

No. 7. EOG Resources

Ticker: EOG

Probability of achieving CFROI implied by market: 29%

EOG resources is a natural-gas and oil exploration company headquartered in Texas. New technology and regulation are key concerns to Credit Suisse analysts, but the folks at Goldman Sachs recently rated the company a stock ready to skyrocket, so the verdict is still out on this one.

No. 6. Carrizo Oil and Gas

Ticker: CRZO

Probability of achieving CFROI implied by market: 23%

Carrizo is on this list for the same reasons as EOG. Increasing regulation or new technology not created by the oil-exploration company would put its revenue at risk.

No. 5. WisdomTree Investments

Ticker: WETF

Probability of achieving CFROI implied by market: 35%

WisdomTree is an asset manager specializing in exchange-traded funds. Credit Suisse said that globalization, innovation, and regulation are all concerns for WisdomTree.

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