AMETEK trades at $180.81 and has moved in lockstep with the market. Its shares have returned 8.7% over the last six months while the S&P 500 has gained 6.4%.
Is there a buying opportunity in AMETEK, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.We're sitting this one out for now. Here are three reasons why we avoid AME and a stock we'd rather own.
Why Is AMETEK Not Exciting?
Started from its humble beginnings in motor repair, AMETEK (NYSE: AME) manufactures electronic devices used in industries like aerospace, power, and healthcare.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, AMETEK’s sales grew at a mediocre 6.2% compounded annual growth rate over the last five years. This was below our standard for the industrials sector. 
2. Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Internet of Things companies should track organic revenue in addition to reported revenue. This metric gives visibility into AMETEK’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, AMETEK’s organic revenue averaged 2.5% year-on-year growth. This performance was underwhelming 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. 
3. Free Cash Flow Margin Stuck in Neutral
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, AMETEK’s margin was unchanged over the last five years, showing it couldn’t improve. Its free cash flow margin for the trailing 12 months was 24.4%.
Final Judgment
AMETEK isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 24.8× forward price-to-earnings (or $180.81 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. We’d suggest looking at Google, whose cloud computing and YouTube divisions are firing on all cylinders.
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