Bio-Techne (TECH)

Life sciences company Bio-Techne (NASDAQ:TECH) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 4.2% year on year to $316.2 million. Its non-GAAP profit of $0.56 per share was 10.4% above analysts’ consensus estimates.

Company Overview

With a catalog of hundreds of thousands of specialized biological products used in laboratories worldwide, Bio-Techne (NASDAQ:TECH) develops and manufactures specialized reagents, instruments, and services that help researchers study biological processes and enable diagnostic testing and cell therapy development.

The life sciences subsector specializing in research tools and consumables enables scientific discoveries across academia, biotechnology, and pharmaceuticals. These firms supply a wide range of essential laboratory products, ensuring a recurring revenue stream through repeat purchases and replenishment. Their business models benefit from strong customer loyalty, a diversified product portfolio, and exposure to both the research and clinical markets. However, challenges include high R&D investment to maintain technological leadership, pricing pressures from budget-conscious institutions, and vulnerability to fluctuations in research funding cycles. Looking ahead, this subsector stands to benefit from tailwinds such as growing demand for tools supporting emerging fields like synthetic biology and personalized medicine. There is also a rise in automation and AI-driven solutions in laboratories that could create new opportunities to sell tools and consumables. Nevertheless, headwinds exist. These companies tend to be at the mercy of supply chain disruptions and sensitivity to macroeconomic conditions that impact funding for research initiatives.

Bio-Techne competes with several life sciences tools providers including Thermo Fisher Scientific (NYSE:TMO), Danaher (NYSE:DHR), Agilent Technologies (NYSE:A), and Abcam (NASDAQ:ABCM). In the spatial biology and diagnostics space, competitors include 10x Genomics (NASDAQ:TXG) and NeoGenomics (NASDAQ:NEO).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $1.21 billion in revenue over the past 12 months, Bio-Techne is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Bio-Techne grew its sales at a decent 9.9% compounded annual growth rate. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Bio-Techne’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend.

Bio-Techne also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Bio-Techne’s organic revenue averaged 3.4% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Bio-Techne grew its revenue by 4.2% year on year, and its $316.2 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will spur better top-line performance.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Bio-Techne has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 22.3%.

Analyzing the trend in its profitability, Bio-Techne’s operating margin decreased by 10.3 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 11.1 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

This quarter, Bio-Techne generated an operating profit margin of 12.2%, down 9.8 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Bio-Techne’s remarkable 9.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q1, Bio-Techne reported EPS at $0.56, up from $0.48 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Bio-Techne’s full-year EPS of $1.89 to grow 10.2%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Bio-Techne has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 22.8% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that Bio-Techne’s margin dropped by 8.2 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Bio-Techne’s free cash flow clocked in at $31 million in Q1, equivalent to a 9.8% margin. The company’s cash profitability regressed as it was 11.5 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Bio-Techne’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 8.9%, slightly better than typical healthcare business.

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, Bio-Techne’s ROIC averaged 4.8 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Bio-Techne reported $140.7 million of cash and $423.5 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $425.1 million of EBITDA over the last 12 months, we view Bio-Techne’s 0.7× net-debt-to-EBITDA ratio as safe. We also see its $2.67 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Bio-Techne beat analysts’ EBITDA and EPS expectations this quarter despite in line revenue. Zooming out, we think this was a decent quarter. The stock traded up 6.1% to $50.54 immediately following the results.

Updated: July 10, 2025 at 11:42 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Bio-Techne, you should also grasp the company’s longer-term business quality and valuation.

Bio-Techne isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was good over the last five years, it’s expected to deteriorate over the next 12 months and its subscale operations give it fewer distribution channels than its larger rivals. And while the company’s impressive operating margins show it has a highly efficient business model, the downside is its cash profitability fell over the last five years.

Bio-Techne’s P/E ratio based on the next 12 months is 26.1x. This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $67.12 on the company (compared to the current share price of $54.94).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.