We came across a bullish thesis on Mettler-Toledo International Inc. (MTD) on Substack by Douglas Ott. In this article, we will summarize the bulls’ thesis on MTD. Mettler-Toledo International Inc. (MTD)’s share was trading at $1331.97 as of Feb 11th. MTD’s trailing and forward P/E were 32.90 and 31.25 respectively according to Yahoo Finance.
An exterior view of a modern laboratory, showcasing the latest equipment of a biotech company.
Mettler Toledo (MTD) has been one of many companies dealing with a post-COVID overhang, with its stock price unchanged over the past 3.5 years. However, after reporting FY2024 results, it appears the company has turned a corner, delivering two consecutive quarters of positive revenue growth following a period of decline. A key stabilizing factor has been MTD’s service revenue, supported by a $16 billion installed base of lab instruments and weighing systems that require regular maintenance. This recurring revenue stream has proven resilient, much like service-driven businesses such as Rollins and Cintas, which have historically maintained growth even during economic downturns.
What stands out in recent results is MTD’s consistent margin expansion, with Q4 2024 gross margins hitting a record 61.2%. Despite not breaking out product and service margins separately, both segments have likely reached all-time highs. MTD’s pricing power has been a crucial driver of these gains, enabled by its dominant market position, highly regulated customer base, and mission-critical products. With a 25-30% market share in its core segments, competition remains fragmented, providing opportunities for further consolidation and growth. The company’s ability to pass on price increases—historically capturing at least 200 basis points annually—has been a long-term advantage, even during downturns like 2009.
MTD embodies many qualities of a high-quality business. It serves industries where precision and compliance are non-negotiable, making its products indispensable to customers. Furthermore, its products represent a small fraction of customers’ total spending, allowing for strong pricing power. The company benefits from a “picks and shovels” model, selling essential equipment to pharmaceutical, research, and industrial clients rather than taking direct risks in those industries. Management has consistently emphasized the opportunity to grow by expanding market share in fragmented categories, reinforcing its long-term trajectory.
A key advantage is MTD’s service business, which not only generates high-margin revenue but also facilitates additional product sales through in-person interactions. The company has maintained disciplined capital allocation, preferring share buybacks and acquisitions over dividends, reducing its share count from 44.5 million in 2004 to 21.1 million today. This strategy has allowed MTD to continuously reinvest in growth while returning capital to shareholders.
Over the past two decades, gross margins have expanded from 46% to 60%, with service margins improving at nearly twice the rate of product margins. The company’s ability to grow gross profits faster than revenues has resulted in structurally higher margins. Despite a temporary setback in 2024, incremental gross margins have averaged 50-60% for nearly two decades, a remarkable achievement.
Looking at valuation, MTD now trades at an EBITDA multiple last seen in 2017, but with a much stronger business—higher revenues, improved margins, and a proven ability to expand profitability. The multiple soared to nearly 40x during the COVID boom before falling below 20x in 2023, offering investors an opportunity to own a world-class business at a reasonable price. With a durable competitive position, pricing power, and expanding margins, MTD presents a compelling long-term investment opportunity, and perhaps a chance to correct past mistakes of overlooking a great company at a fair price.
Mettler-Toledo International Inc. (MTD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held MTD at the end of the third quarter which was 42 in the previous quarter. While we acknowledge the risk and potential of MTD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.