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AMETEK Inc

AME: XNYS (USA)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
$578.70SckMlfrfklwb

No Surprises in Ametek's Results as the Firm Remains Well Positioned To Continue Compounding Cash

Business Strategy and Outlook

Ametek is a cash compounder that combines premier elements of best-in-class conglomerates. First, like Roper, Ametek prefers allocating capital through acquisitions. Its asset-light model’s firepower focuses on companies that compete on differentiated technology and hold dominant positions in oligopolistic niches. Second, like Danaher and Fortive, the company materially improves its targets’ underlying operating margins. Ametek often reduces the amount targets spend on raw material costs through superior supply chain sourcing. Third, like 3M, Ametek allocates a large quantity of dollars as a percentage of sales to research, development, and engineering (about 5.5% of Ametek's sales). RD&E expenditures allow Ametek to charge a premium for its products relative to the market. They also provide Ametek with greater than inflation pricing power, typically a 50-basis-point spread. Finally, like Idex, Ametek generally focuses its acquisition activities on existing adjacencies. In our view, this focus minimizes the firm’s execution risks.

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