Revvity, Inc. (RVTY)

Total return at 5 years: -1.6%/year = -1.8% appreciation + 0.2% dividend. The target price ($142) is ex-dividend; the $1 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $132 · Multiples $115) is below the market price ($156).

Today — expensive, no margin of safety: at $156 trades ~35.1% above its value discounted to today (~$115); 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 ~$72.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($156) 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 (7.3%/year) above our base case (4.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$0.9 bn of owner earnings in year 5 (vs ~$0.8 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). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT (EV/NOPAT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM ended 5-Jul-2026 ($2.912bn of revenue). Year 1 starts at 4.5%, the midpoint of the raised pro forma organic growth guidance for 2026 (4-5%, release of 4-Aug-2026), in line with the recent trajectory (FY24 +0.2%, FY25 +3.7%, TTM +4.1%): there is no under-start or over-start, the path takes the guidance exactly as the company declared it. The guidance is given on a pro forma basis, excluding the Immunodiagnostics business in China (China IDX, ~6% of FY2025 revenue) that Revvity agreed to divest on 31-Jul-2026 with closing expected only in late 2027; since the closing falls toward the middle of the 5-year horizon and the revenue to be divested is a minority, the model uses the reported consolidated base (including China IDX) rather than manufacturing a level break halfway through, and this simplification is declared. Adjusted earnings (excluding the amortization of acquired intangibles, restructuring charges and other non-recurring items) are the correct metric because GAAP earnings are structurally depressed by the amortization of intangibles from historical acquisitions (BioLegend, Euroimmun), not by operating weakness: the adjusted net margin starts at ~20.0% (TTM) and converges to ~21.8% in year 5 on the mix shift toward Diagnostics (Immunodiagnostics and Reproductive Health, growing double digits) and the normalization of the elevated 2025 restructuring charges. The base exit multiple (17× at 5 years, 18× at 3 years) sits in the lower half of the medical technology band [16-22×] because the return on invested capital (~3.4%) falls well below the 10% bar, weighed down by goodwill accumulated from acquisitions, not by weakness in the current business. Share repurchases are material (US$820.8 million in 2025, 6.3% of market capitalization) and are modeled with an explicit share path (sharesPath), the same one for all three scenarios (§6), without accumulating cash. The rate is anchored to the net reduction revealed by the shares outstanding series —4.0% a year over the last twelve months, 4.9% over two years and 3.5% over three— and matches what the flow sustains: free cash flow of the last twelve months (US$558 million) less the dividend (US$31 million) equals 4.0% of market capitalization. Long-term debt stays flat at US$2.63bn, so the buyback is not leveraged. The path decays to 3.6% by year 5 on the base case price appreciation.

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 $142 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $156, 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 $142 in 5 years plus $1 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $115. Against the current market price ($156), the margin of safety is -35.1% (trades above the maximum → a premium is paid) and the total return at that price would be -1.6% annually.

• Entry multiple. 29× the trailing-twelve-month adjusted after-tax result, against the med-tech band [16-22×].
• Guidance already recognized. The price already reflects the August 4, 2026 guidance raise.
• Margin of safety. No margin of safety: the price already discounts a demanding scenario., with the base-scenario exit multiple (17x) implying compression versus the current entry.

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

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (151%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Stable operating cash flow (~US$0.63 billion TTM) with low maintenance capex, giving solid owner earnings relative to GAAP net income.
• Return on capital. Return on invested capital (~3.4%) sits well below the 10% bar, weighed down by goodwill from historical acquisitions.
• Earnings quality. GAAP earnings are depressed by non-economic amortization of intangibles and by elevated restructuring charges in FY2025; adjusted earnings better reflect the cash generated by the recurring business.

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

The two segments share the same economic driver —an installed instrument that generates recurring reagent consumption— so the segment breakdown (Life Sciences vs Diagnostics) is the most informative cut, more than a single volume-times-price driver. Adjusted operating income by segment shows the one-time impact of tariffs and restructuring in FY2025, with a visible recovery in the most recent TTM as those charges normalize.

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 (05-jul-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).

• Diagnostics. Double-digit organic growth in the second quarter of 2026 (+11%), driven by immunodiagnostics and reproductive health.
• Life Sciences. Slight organic contraction (-3% in the second quarter of 2026) due to caution among pharmaceutical and biotech customers amid funding uncertainty.
• Raised guidance. 2026 pro forma organic growth guidance was raised to 4-5%, with adjusted EPS of US$5.30-5.40, following a stronger-than-expected second quarter.

• Instrument-plus-consumable model. Recurring reagent revenue with a real switching cost once the platform is installed in the laboratory.
• Regulatory barriers in Diagnostics. FDA authorization, CE marking, and IVDR impose entry costs on new competitors.
• Fragmented market. The company itself anticipates further consolidation among large competitors, pressuring the moat's width at the margin.
• Uneven segment mix. Diagnostics is accelerating while Life Sciences is contracting slightly due to caution among pharmaceutical and biotech customers.

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 debt / EBITDA 1.9x
• ✓Interest coverage (EBIT / interest)8.3x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 151% of ROIC
• ✕Value creation (ROIC − 10% bar)-3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.2x — no over-investment
• !Float / working capitalConsumes cash $0 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.8% 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. Total debt of ~US$3.2 billion against equity of ~US$7.2 billion; manageable but with restrictive debt covenants.
• Liquidity. Cash of ~US$1.0 billion and stable operating cash flow comfortably cover current debt service.
• Maturity structure. Multiple series of senior notes with staggered maturities between 2026 and 2051, plus a revolving credit facility.

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

• Capital allocation. Strongly prioritizes share buybacks (~74% of capital deployed) over the dividend, which has remained frozen for more than three years.
• Active portfolio management. Agreed to sell the China Immunodiagnostics business to simplify the portfolio and focus resources.
• Skin in the game. No controlling shareholder or founding family; director and executive holdings are modest relative to shares outstanding.

• The stock has already priced in the raised second-quarter 2026 guidance, reflecting recent momentum in Diagnostics and the reinvestment of tariff reimbursements.
• Return on invested capital (~3.4%) sits well below the 10% bar, partly due to the goodwill load from historical acquisitions (BioLegend, Euroimmun): this is not a transitory market anomaly but a structural characteristic the price already reflects.
• No clear source of missing buyers or motivated sellers is identified: coverage is normal for an S&P 500 component, and there is no recent panic, forced restructuring, or disappointing result to explain a discount.

Unlike the typical opportunity pattern (perception worse than reality), here perception appears to have caught up with reality: the August 4, 2026 guidance raise and the China IDX divestiture have already moved the price. Without an identifiable discount catalyst, the honest reading is that the stock is not cheap at the current price, regardless of the genuine quality of the underlying business.

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 -10%/year (-41% total): the margin of safety protects the downside. The bull (+4%/year, +24% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• R&D funding. Cuts to government funds or a biotech capital pullback could deepen the contraction in Life Sciences.
• Intangible impairment. The US$9.0 billion of net intangibles are exposed to impairment if growth fails to sustain the valuations of past acquisitions.
• Divestiture execution. Closing of the China Immunodiagnostics sale is not expected until late 2027, with risk of delay or changed terms.
• Tariffs. New tariffs or trade restrictions could worsen the ~US$25 million impact already suffered in FY2025.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 7% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 4% at a multiple/growth of 7.2 → expensive for its growth.

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

  Earnings yield 4% (EBIT/EV) + ROIC 7% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 7% vs our 4%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -10%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

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

• Aswath Damodaran Expectations implied by the price

  The price implies 7% vs our 4%: coherent, but at the optimistic end of the range.