Over the past six months, Mettler-Toledo’s shares (currently trading at $1,279) have posted a disappointing 9.4% loss, well below the S&P 500’s 8.5% gain. This might have investors contemplating their next move.
Is now the time to buy Mettler-Toledo, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Mettler-Toledo Not Exciting?
Even though the stock has become cheaper, we’re swiping left on Mettler-Toledo for now. Here are three reasons why there are better opportunities than MTD, plus one stock we’d rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Research Tools & Consumables companies. This metric gives visibility into Mettler-Toledo’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Mettler-Toledo’s organic revenue averaged 2.7% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Mettler-Toledo’s revenue to rise by 4.8%, close to its 4.8% annualized growth for the past five years. This projection doesn’t excite us and implies its newer products and services will not lead to better top-line performance yet.
3. New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Unfortunately, Mettler-Toledo’s ROIC averaged 4 percentage point decreases each year over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Mettler-Toledo’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 26.3× forward P/E (or $1,279 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Mettler-Toledo
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