Bruker’s stock price has taken a beating over the past six months, shedding 31.2% of its value and falling to $34.45 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Bruker, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Bruker Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Bruker. Here are three reasons why there are better opportunities than BRKR and a stock we'd rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
We can better understand Research Tools & Consumables companies by analyzing their organic revenue. This metric gives visibility into Bruker’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Bruker’s organic revenue averaged 4.8% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Free Cash Flow Margin Dropping
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.
As you can see below, Bruker’s margin dropped by 12.4 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Bruker’s free cash flow margin for the trailing 12 months was 1.4%.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
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, Bruker’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Bruker isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 13.1× forward P/E (or $34.45 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward our favorite semiconductor picks and shovels play.
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