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. Avantor’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5% annually.

We can dig further into the company’s sales dynamics by analyzing its 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 4.9% year-on-year declines. 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, Avantor missed Wall Street’s estimates and reported a rather uninspiring 2.1% year-on-year revenue decline, generating $1.69 billion of revenue.

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

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Adjusted Operating Margin

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 17.7%.

Looking at the trend in its profitability, Avantor’s adjusted operating margin of 16.1% for the trailing 12 months may be around the same as five years ago, but it has decreased by 3.6 percentage points over the last two years. This dynamic unfolded because it failed to adjust its fixed costs while demand fell.

This quarter, Avantor generated an adjusted operating profit margin of 16.6%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

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 a decent 6.5% compounded annual growth rate over the last five years, higher than its 2.3% annualized revenue growth. However, we take this with a grain of salt because its adjusted operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q4, Avantor reported EPS at $0.27, up from $0.25 in the same quarter last year. This print beat analysts’ estimates by 4.5%. Over the next 12 months, Wall Street expects Avantor’s full-year EPS of $1 to grow 9.8%.

Key Takeaways from Avantor’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its organic revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 5.4% to $20.51 immediately following the results.

Avantor underperformed this quarter, but does that create an opportunity to invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free .