Mettler-Toledo (MTD)

By both methods, the value today (DCF $1,253 · Multiples $957) is below the market price ($1,356).

Today — expensive, no margin of safety: at $1,356 trades ~41.7% above its value discounted to today (~$957); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$593.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($1,356) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (6.5%/year) above our base case (4.7%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$1.3 bn of owner earnings in year 5 (vs ~$1.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on P/E — utilidad neta (mid-cycle). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year-0 is the TTM closed as of Jun 30, 2026 (US$4,134M in revenue, US$906M in net income), taken directly from the most recent XBRL (10-Q of Jul 31, 2026), so nothing needs to be mechanically re-anchored — the directive from the prior classification stage confirms this. The only thing the 8-K of Jul 30, 2026 contributes is guidance, which anchors year 1 (§5 R1 previous): for full fiscal year 2026, management expects local-currency sales of +4% to +5% (excluding the 2025 tariff refund, which was a one-year event) and adjusted earnings per share of US$47.15 to US$47.50, growth of ~10-11% — well above sales growth, reflecting margin expansion via the Spinnaker program and buyback accretion. The base case anchors year 1 at 4.5% (guidance midpoint) and gently decelerates/accelerates toward a 5.0% terminal rate, within the 4-8% band of the industrial mid-cycle archetype — growth just above real FY2025 (4.0%) and well below the reported TTM (6.9%), which is inflated by a weak comparable and by the tariff-refund dynamic that will not repeat. The adverse scenario stresses year 1 (1.0%, well below guidance) reflecting the risk of further deterioration in China and in the biopharma/academia markets that the 10-K itself flags as already underway; the favorable scenario extends the runway to 6.0-7.0% if China stabilizes and the service mix keeps gaining weight. Net margin starts from the TTM (21.9%) and gradually expands in the base case toward 23.6% by year 5, consistent with guidance that adjusted earnings grow ~2.5x faster than sales — the difference versus guided EPS growth (10-11%) is explained by buybacks (share count falling ~3.1%/year, the net rate sustained between FY22 and the TTM, corroborated by the buyback guidance of US$825-875M for 2026 at the current price). The share path is THE SAME across all three scenarios (§6): capital-return policy does not vary by scenario, only the business does. MTD pays no dividend — 100% of capital return is via buybacks, so there is no net cash accumulation (`accumulateCash:false`); excess FCF is deployed entirely into buybacks. The company is valued at the EQUITY level (P/E on income already net of interest): `cajaStart` and `deuda` are set to zero because net income already incorporates the cost of debt (US$2,112M, with near-zero book equity — US$12.8M as of Jun 30, 2026 — the product of years of aggressive buybacks partly financed with debt; the balance sheet's real invested capital —equity + debt − cash, US$2,073M— is the correct base for ROIC, never net debt alone). The base case exit multiple (16×) falls within the industrial archetype band [12,18] despite the extraordinary ROIC (~46.6% TTM, well above the 10% bar) — reflecting in part a structurally small invested-capital base from historical buybacks, not just outsized operating efficiency — because risk/quality already enters via the position score, without forcing the multiple above the disciplined ceiling; the stock trades today at a TTM P/E of ~30x, well above the ceiling of the band, so the verdict under this framework reflects a quality premium that the multiple discipline does not validate — not a value opportunity. MTD's reportable segments are geographic (U.S., Switzerland, Western Europe, China, Other), not lines of business of a different nature, so a multi-piece sum-of-the-parts is not warranted: it is valued as a single business of precision instruments and service.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $1,193 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $1,356, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $1,193 in 5 years and a required return of 4.5% annually, the maximum to pay today is $957. Against the current market price ($1,356), the margin of safety is -41.7% (trades above the maximum → a premium is paid) and the total return at that price would be -2.5% annually.

• Entry multiple well above the band. ~30× TTM earnings against a disciplined band ceiling of 18×.
• Expected return at market price. -3% over 5 years in the base case — Overvalued.
• No margin of safety today. No margin of safety: the price already discounts a demanding scenario.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (101%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. ~47% TTM, well above the 10% bar.
• Cash conversion. Maintenance FCF (~US$920M TTM) close to net income (~US$906M TTM), earnings quality backed by cash.
• Structurally small invested capital. Book equity of only US$12.8M after decades of buybacks, which inflates the ROIC percentage without being purely a sign of operating efficiency.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

MTD does not report consolidated volume/unit operating KPIs (number of instruments sold, backlog, etc.); the available drivers with verifiable series in the 10-K and the 8-K are revenue-mix drivers (service vs. product, business segment) and capital-return via buybacks.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Raised guidance. Sales +4-5% and adjusted EPS +10-11% for full-year 2026, both guides raised relative to prior.
• China as a recent headwind. Demand deteriorated since the second half of 2023, with improvement signals only in the second quarter of 2026.
• TTM inflated by comparables. The 6.9% TTM growth rate is not representative of the guided sustainable pace (4-5%).

• Claimed market leadership. The company claims the number-one global position in most of its lines, with the sector's most extensive service network.
• Customer diversification. No end customer exceeds 1% of 2025 net sales.
• Growing recurring service mix. 23% → 24% → 25% of net sales between FY2023 and FY2025.
• Fragmented and competitive market. The 10-K itself acknowledges that competitive forces may harm margins in certain lines and geographies.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)16.9x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 101% of ROIC
• ✓Value creation (ROIC − 10% bar)+37pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.8x — no over-investment
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.6% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Debt of ~US$2,112M against near-zero book equity (US$12.8M), a structure typical of a long-time aggressive buyer of its own stock.
• Interest coverage. Operating income (~US$1,166M TTM) covers interest expense (~US$69M TTM) with ample margin.
• Credit facility financial covenants. The revolving facility of up to US$1,350M, funded by 13 banks, requires meeting financial ratios; a breach allows immediate repayment.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Insider ownership. Directors and executives as a group own only 0.71% of shares — low direct skin in the game.
• Capital discipline. Near-total return of excess capital via buybacks, no dividend, funded by FCF rather than incremental debt.
• Guidance track record. July-2026 guidance raised (not cut) both sales growth and adjusted earnings per share relative to prior guidance.

• No clear source of missing buyers or motivated selling is identified: the stock trades only ~10% below its 52-week high
• Return on capital and business quality are genuinely exceptional, but that is already reflected in a market multiple (~30× earnings) well above the industrial archetype's disciplined band
• July-2026 guidance was a raise (not a cut) relative to prior guidance, so there is no recent downward revision that would explain a discount

Under this framework, MTD does not appear cheap: at today's price it pays a quality premium that this methodology's multiple discipline does not validate under any scenario, not even the favorable one.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -11%/year (-45% total): the margin of safety protects the downside. The bull (+2%/year, +11% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• China concentration. 29% of segment profit on only 16% of sales, with demand already deteriorated since 2023.
• Tariff exposure. ~US$50 million of incremental cost incurred in 2025 before mitigation.
• Currency exposure. Manufacturing in Swiss francs, sales in euros and renminbi, material sensitivity to 1% moves.
• Fragmented and competitive market. The 10-K itself acknowledges pressure on margins in certain lines and geographies.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 47% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 5% at a PEG of 6.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 4% (EBIT/EV) + ROIC 47% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 7%, in line with our 5%: perception and reality aligned.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -11%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: switching costs, efficient scale, intangibles, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 7% vs our 5%: coherent, but at the optimistic end of the range.