Over the past six months, Revvity’s stock price fell to $90.78. Shareholders have lost 18.8% of their capital, which is disappointing considering the S&P 500 has climbed by 5.2%. 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? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Revvity Will Underperform?
Despite the more favorable entry price, we're cautious about Revvity. Here are three reasons why there are better opportunities than 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 one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Looking at the trend in its profitability, Revvity’s adjusted operating margin decreased by 9.9 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 27.7%.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared 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. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We see the value of companies making people healthier, but in the case of Revvity, we’re out. Following the recent decline, the stock trades at 17.2× forward P/E (or $90.78 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at one of our top digital advertising picks.
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