Although AMETEK (currently trading at $186 per share) has gained 14.7% over the last six months, it has trailed the S&P 500’s 24.7% return during that period. This might have investors contemplating their next move.
Is there a buying opportunity in AMETEK, 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 for active Edge members.
Why Is AMETEK Not Exciting?
We don't have much confidence in AMETEK. Here are two reasons there are better opportunities than AME and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. AMETEK’s recent performance shows its demand has slowed as its annualized revenue growth of 4.3% over the last two years was below its five-year trend. We also note many other Internet of Things businesses have faced declining sales because of cyclical headwinds. While AMETEK grew slower than we’d like, it did do better than its peers. 
2. Core Business Falling Behind as Demand Plateaus
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 failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests AMETEK might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
Final Judgment
AMETEK’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 24.8× forward P/E (or $186 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of AMETEK
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