đ§ AMETEK (NYSE: AME): Quiet Compounder with 12% Upside
AMETEK delivers ~15% 5-year and +1,541% 20-year returns, outpacing S&P 500 through precision acquisitions, endorsed by value investor Francois Rochon.
Overview
Company: AMETEK, Inc. (NYSE: AME)
Analyst: Francois Rochon – Giverny Capital
Action: Buy
Forward P/E:~29x
P/B:4.1
Dividend Yield:0.65%
Data as of June 2025, sourced from Yahoo Finance, Investing.com, and AMETEK reports. Revenue: $7.0B (2024â2025 annualized) vs. ~$8B (2025 projected). Not financial advice. Do your own research.
Key Thesis
AMETEK grows earnings faster than the S&P 500 through precision acquisitions of niche industrial tech leaders. Its disciplined acquisition engine, diversified global presence (~50% non-U.S. sales), and operational excellence (26.6% operating margin) deliver consistent EPS growth (~7% YoY), high ROIC (10%+ by Year 3), and margin expansion.
Company Overview
AMETEK, Inc. (NYSE: AME) is a global leader in electronic instruments and electromechanical devices, with ~$7.0B in annualized sales across 150+ countries. Operating two segmentsâElectronic Instruments (EIG, ~75% of sales) and Electromechanical (EMG)âAMETEK serves mission-critical niches in aerospace, MedTech, semiconductors, and energy. 26% of sales come from products launched in the last three years, driven by 5.0% R&D investment (~$350M/year).
Analyst Profile
Francois Rochon, President of Giverny Capital, is a value investor inspired by Warren Buffett. His “Quality Value” strategy targets 25â30 high-quality companies with durable moats, strong management, and consistent earnings growth (~12% annually for AMETEK). Givernyâs long-term approach prioritizes sustainable competitive advantages, aligning with AMETEKâs niche dominance.
AMETEK Growth Flywheel
AMETEKâs growth is powered by a disciplined acquisition strategy: âWe target niche markets with differentiated technology where we can lead,â says management. Since 2016, AMETEK deployed $8.1B across 33 acquisitions, targeting:
Year 1: Cash accretive
Year 3: 10%+ ROIC
20%+ selling profit within 3 years
Highlights: Paragon Medical (2023, $1.9B, ~$450M sales) and optical/laser inspection tech (2024â2025) for semiconductors, defense, and MedTech. Average capital deployed: ~$900M/year, driving margin-accretive growth.
Why It Works
AMETEK targets high-barrier, mission-critical niches (e.g., RF microwave systems, robotic surgery components) with secular tailwinds: automation, electrification, and sustainability. Its AMETEK Growth Model compounds value through:
Post-acquisition margin expansion
Lean/Kaizen methodologies
Low-cost engineering centers (e.g., India)
These deliver ~15% 5-year and +1,541% 20-year returns (vs. S&P 500 ~10% and 602%).
đ Global & Sector Diversification: AMETEKâs Hidden Edge
For value investors, AMETEKâs ability to outperform across cycles stems not only from acquisition discipline but also from a
deliberate diversification strategy â both geographic and sectoral.
đ Global Reach: Structural Risk Reduction
With ~50% of revenue generated outside the U.S., AMETEK isnât overexposed to any single economy:
U.S.: ~$3.6B (2024)
Europe: ~$1.5B
Asia: ~$1.9B
Its global expansion includes:
New Technology Solution Centers across Asia and Europe
Low-cost engineering hubs (e.g., India)
Sales/service infrastructure in key growth regions
đ This structure provides built-in macro risk insulation and a stronger foothold in fast-growing industrial economies.
đ Sector Breadth: Multi-Industry Moat
Unlike single-sector industrials, AMETEK operates across a highly diversified set of verticals, each with strong secular growth:
End Market
Exposure
Strategic Role
Aerospace & Defense
High
Mission-critical avionics & radar systems
Medical & Healthcare
Rising
Precision tools for robotic & surgical tech
Industrial Automation
Core
Motion control, inspection, machine vision
Semiconductors
Strategic
Optical metrology & cleanroom equipment
Energy & Utilities
Core
Grid testing, reliability instrumentation
Research & R&D Labs
Stable
Measurement, test & detection platforms
This diversified structure:
Reduces earnings volatility common in single-sector industrials
Enhances pricing power through deep specialization
Supports adjacent market expansion via platform M&A
đ§ AMETEK doesnât chase scale â it builds leadership in defensible, overlooked niches where technology drives margin.
Investor takeaway: This level of global and sectoral diversification is a durable strategic asset â enabling AMETEK to
compound capital efficiently, stay resilient through macro cycles, and outperform broader indices with less risk.
Valuation Metrics
Intrinsic Value
$196.62
DCF model (3% revenue growth, 26.6% EBIT margin, 8% discount rate) projects a 12% upside from $177.50, with a ~10% margin of safety, backed by $1.6B FCF (112% conversion).
Forward P/E
~29x
Premium justified by ~7% EPS growth vs. Fortive (~30x).
EV/EBITDA
18.8
Competitive vs. Roper (~23x); 31% EBITDA margin.
P/B
4.1
Higher than Teledyne (~2.4), reflects quality assets.
ROE
~18%
Strong capital efficiency.
FCF Yield
~3.5%
Supports acquisitions and buybacks.
Net Debt/EBITDA
~0.7x
Low leverage (gross 0.85x) vs. Fortive (~1.5x).
Capital Allocation
AMETEK deployed $12B since 2015 ($8.1B acquisitions, 15% buybacks), with 10%+ dividend growth (6-year CAGR). Net debt/EBITDA (~0.7x) and $2.5B liquidity enable further deals.
Dividend Analysis
Dividend Yield
0.65%
AMETEKâs 0.65% yield ($1.12/share) is sustainable (~19% payout ratio), with 10%+ annual increases for six years, backed by $1.6B FCF. Growth signals discipline.
