Over the past six months, Revvity’s stock price fell to $102.40. Shareholders have lost 16.5% of their capital, which is disappointing considering the S&P 500 has climbed by 7.6%. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Revvity, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Revvity Will Underperform?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why you should be careful with RVTY and a stock we'd rather own.
1. Weak Constant Currency Growth Points to Soft Demand
In addition to reported revenue, constant currency revenue is a useful data point for analyzing Research Tools & Consumables companies. This metric excludes currency movements, which are outside of Revvity’s control and are not indicative of underlying demand.
Over the last two years, Revvity’s constant currency revenue averaged 2% year-on-year growth. This performance slightly lagged the sector and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.
2. Shrinking Adjusted Operating Margin
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Looking at the trend in its profitability, Revvity’s adjusted operating margin decreased by 8.8 percentage points over the last five years. Even though its historical margin was healthy, shareholders will want to see Revvity become more profitable in the future. Its adjusted operating margin for the trailing 12 months was 28.3%.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Revvity’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We see the value of companies making people healthier, but in the case of Revvity, we’re out. After the recent drawdown, the stock trades at 19.8× forward P/E (or $102.40 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.
Stocks We Like More Than Revvity
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