About Mettler-Toledo
If anyone’s going to tip the scales, it is undoubtedly going to be stateside headquartered Columbus, Ohio (although the company’s primary headquarters is all the way over in Greifensee, Switzerland) precision scale and measuring company Mettler-Toledo.
Mettler-Toledo is quite literally an extraordinaire when it comes to scales, measurements and all that sort of stuff, as it is one of the world’s largest and most trusted developers, manufacturers and sellers of basically any sort of product that has the task of measuring something and accurately quantifying that thing that is being measured, usually within the context of how much something weighs.
Right off the bat, it can instantly be seen that Mettler-Toledo serves many, many industries and customers worldwide, sort of similar to a company I recently analyzed, reportedly serving the world’s biggest and most important companies like Pfizer, Nestle, Procter & Gamble, Johnson & Johnson, The Coca Cola Company, Siemens, Bayer, Danone, among plenty of others, which is both great to recognize but is also undoubtedly sensible being that the sheer amount of applications with Mettler-Toledo’s products are voluminous in their own rights, as practically any single grocery store you’ve walked into, doctor office, medical lab, research facility, manufacturing plant and so many other settings necessitate having this company’s products at their disposal.
It is sort of a boring business, no doubt about it, but boring in the business world usually ends up meaning essential, especially when a company has achieved the sort of scale that Mettler-Toledo has at this point, and with a markedly diversified product and client portfolio and the aforementioned fact that this company’s products have plenty of different use cases, I think it is fair to initially assume that Mettler-Toledo is resistant to general recessionary pressures, and while pretty much no single company is completely immune to negative economic pressures, I would imagine that this company isn’t too far away.
I also take a bit of rather weird pleasure in knowing that this company’s seemingly simple products do a lot of good for the world we live in, as I certainly have taken for granted just how important it is to have an accurate scale in my everyday life, not to mention the fact that government agencies, say, as a completely random example, the Environmental Protection Agency (EPA) more than likely rely on this company’s products in most accurately testing and tracking water and the contents within, so as to help ensure the water we consume is safe.
Again, this is merely one of many use cases and applications of Mettler-Toledo’s products.
From regular old analog scales to high-tech, wickedly accurate digital scales, this company knows its line of business and has a defined track record of doing it quite well and like I alluded to before, its competitive moat is borderline ridiculous, of course, in the best way possible from the perspective of a prospective shareholder.
Now, I think it is worth briefly pointing out that Mettler-Toledo derives just over half of its revenues from the laboratory market alone, which I think naturally acts as a strong hedge against economic downturns, as the Pfizers and Johnson & Johnsons of the world are, even during an economic downturn, continuously pursuing and investing in research and development (R&D), as the drug development and treatment sector of the pharmaceutical space hardly knows any sort of offseason and with the continued rise in illnesses and diseases afflicting millions upon millions of folks both in the United States but outside of the country as well, in this category alone, Mettler-Toledo is bound to continue seeing more and more demand for its products.
In order to not bore you too much with the background, in summary, Mettler-Toledo is a company that helps entities accurately weigh and measure stuff with their instruments.
That’s basically it.
Now that all of this initial information has been squared away, let’s take a closer look at this company through a financial lens and consider whether or not this company’s stock (NYSE: MTD) is worth its weight.
Mettler-Toledo’s stock financials
In jumpstarting today’s festivities, Mettler-Toledo, according to its current market capitalization, is a $31.01 billion enterprise that is accompanied by a stock price of a whopping $1,430.49 along with a price-to-earnings (P/E) ratio of 40.71 and the firm does not pay its shareholders a regular annual dividend at the moment, but really, as is usually the case with this original bit of information, the valuation is what I tend to have my eyes on the most, and according to this company’s present price-to-earnings ratio, Mettler-Toledo’s stock (NYSE: MTD) is expensive relative to its intrinsic and fair values.
Candidly, I have my initial valuation concerns, as it is certainly not my first assumption that Mettler-Toledo is growing its most recent annual revenues by a strong enough amount that would warrant paying this much of a premium for a slice of the ownership pie given just how seasoned the firm is, but, as always, I could be wrong and I will be checking on this company’s revenues by means of its income statement momentarily.
But first, when it comes to the company’s balance sheet, Mettler-Toledo’s seasoned executive squad is in charge of overseeing and properly managing just about $3.36 billion in terms of total assets as well as $3.5 billion as it relates to the cumulative amount of the liabilities on its books.
Yep, this company is a little more leveraged than I thought it would be, as I frankly assumed this veteran scale technology company would’ve maintained more assets than liabilities, but it seems like Mettler-Toledo is looking to grow further through debt financing, and it is also worth considering the fact that this company operates in a particularly equipment-heavy industry, and thus may be subject to more costs than other, smaller scale operators (get it?) in the space. Nevertheless, I am still mildly spooked by the relatively little amount of cash this company has, as of its most recent reporting period having only $70 million in “Cash and Short Term Investments.” I’m sure Mettler-Toledo has decent overall credit and isn’t going to struggle too much when it comes to drawing on some of its institutional banking partners, however, with the company’s balance sheet already in the condition it is in (i.e., overleveraged), it doesn’t seem to have as much financial breathing room as I would’ve hoped.
At any rate, when it comes to the company’s income statement, Mettler-Toledo’s annual revenues between and during 2019 and 2023 have been pretty darn consistent, even growing a little during this time period from a relative low of just north of $3 billion (2019 and 2020) to its 2022 reported figure being its most recent relative high of $3.9 billion, generally growing at a slow rate each and every year in between.
When not considering the company’s current valuation, I plan on sleeping like a baby with these recent annualized revenue figures, as Mettler-Toledo is a mature company in a mature business spewing mature consistent-to-slightly-growing revenues, but when incorporating the firm’s corresponding valuation, the fact of the matter is that the company isn’t growing quickly enough to justify overpaying this much, in my most objective opinion.
Shifting gears over towards the company’s cash flow statement, Mettler-Toledo’s total cash from operations (also during and between 2019 and 2023) have been growing at a decent rate, ranging between a low of $603 million (2019) and a high reported in its most recent figure of $966 million, as reported and displayed in 2023, offering a bit of needed assurance in that the company is becoming increasingly able to hew down its debts and other outstanding liabilities through the higher amounts of cash it is able to generate each year through its business operations alone.
Mettler-Toledo’s stock fundamentals
As it stands with this company’s net profit margin, Mettler-Toledo’s, according to the figures shown on Charles Schwab’s platform, are measured precisely at a very healthy 20.55%, which directly indicates that it is in great company with respect to its most direct competitors, such as Agilent Technologies and Waters Corporation, both respectively maintaining net profit margins of 18.84% and 20.75%.
I’m just glad to find that the big dog in the industrial measuring space has a net profit margin that is quite aligned with that of its most direct and tough competition.
I didn’t wake up this morning thinking to myself that I was going to be saying that first half of that last sentence, but times just get automatically more exciting when Mettler-Toledo comes into the picture, apparently.
In all seriousness, Mettler-Tolder’s net profit margin is in healthy shape, both on the basis of comparison as well as standing on its own two scales.
Should you buy Mettler-Toledo stock?
Mettler-Toledo is one of those companies that has a single primary purpose for existing and through its narrow focus and through its products and other industrial solutions, serves that purpose exceedingly well.
It helps people and machines measure stuff.
Or at least that is how I would frame it to a small child, but I’m still not all that far off by any stretch.
Or measurement.
Ok, sorry.
On a more technical, investment-focused note, Mettler-Toledo’s stock (NYSE: MTD) is seemingly trading at a notable premium (referencing its aforementioned elevated price-to-earnings ratio), its balance sheet is a tad total liability-heavy, but within the context of this specific company, it isn’t a massive red flag, just something to keep an eye on, particularly over the next five years or so, simply to ensure that Mettler-Toledo’s executives are deploying debt strategically and somewhat sparingly so as to not have to dip into too much of its cash, by the way, which it doesn’t have a whole lot of, even though it has thankfully been growing its total cash from operations over the last handful of years, and the cherry on top for today’s stock analysis article can be the fact that the company’s recent consistent annual revenue figures have been peachy keen consistent-to-growing.
Putting all of these facts, figures and trends together, I still don’t think Mettler-Toledo’s stock is quite worthy of a “hold” rating yet given its valuation, thus, the “sell” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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