Avantor (AVTR)

Life sciences company Avantor (NYSE:AVTR) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 5.3% year on year to $1.62 billion. Its non-GAAP profit of $0.22 per share was in line with analysts’ consensus estimates.

Company Overview

With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE:AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.

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.

Avantor competes with other life sciences suppliers including Thermo Fisher Scientific (NYSE:TMO), Danaher Corporation (NYSE:DHR), MilliporeSigma (a division of Merck KGaA), and Bio-Rad Laboratories (NYSE:BIO), as well as more specialized suppliers in specific product categories.

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 $6.58 billion in revenue over the past 12 months, Avantor has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Avantor grew its sales at a tepid 1.4% compounded annual growth rate. This was below our standards and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Avantor’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.4% annually.

Avantor 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, Avantor’s organic revenue averaged 2.7% year-on-year declines. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Avantor missed Wall Street’s estimates and reported a rather uninspiring 5.3% year-on-year revenue decline, generating $1.62 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 2.4% over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

Avantor has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average adjusted operating margin of 17.5%.

Analyzing the trend in its profitability, Avantor’s adjusted operating margin decreased by 2.6 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 2.7 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.

In Q3, Avantor generated an adjusted operating margin profit margin of 14.6%, down 1.4 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

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.

Avantor’s EPS grew at an unimpressive 4% compounded annual growth rate over the last five years. This performance was better than its flat revenue, but we take it with a grain of salt because its adjusted operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q3, Avantor reported adjusted EPS of $0.22, down from $0.26 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Avantor’s full-year EPS of $0.96 to grow 2.9%.

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.

Avantor has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.3% over the last five years, better than the broader healthcare sector.

Taking a step back, we can see that Avantor’s margin dropped by 4 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Avantor’s free cash flow clocked in at $171.7 million in Q3, equivalent to a 10.6% margin. The company’s cash profitability regressed as it was 1.3 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? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Avantor historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.7%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.

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. Unfortunately, Avantor’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Avantor reported $251.9 million of cash and $3.86 billion 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 $1.12 billion of EBITDA over the last 12 months, we view Avantor’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $99 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.

We struggled to find many positives in these results. Its revenue slightly missed and its organic revenue fell short of Wall Street’s estimates. Overall, this quarter was bad. The stock traded down 17.9% to $12.38 immediately following the results.

Updated: December 4, 2025 at 10:50 PM EST

Are you wondering whether to buy Avantor or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Avantor isn’t a terrible business, but it doesn’t pass our quality test. To begin with, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its sturdy operating margins show it has disciplined cost controls, the downside is its organic revenue declined. On top of that, its diminishing returns show management's prior bets haven't worked out.

Avantor’s P/E ratio based on the next 12 months is 12.8x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $13.64 on the company (compared to the current share price of $11.32).

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.