Ametek Inc (AME)

Conclusion

AMETEK Inc. makes electronic instruments and electromechanical devices for process, aerospace, power, medical and industrial markets. At a price of 238.24 USD on 9 November 2026, the company has a market capitalisation of 54.6 billion USD.

The verdict is overvalued, with a margin of safety of -20.6%. The fair value band runs from 151.41 to 227.12 USD, with a midpoint of 189.26 USD. Today's multiples sit above their own ten-year medians: price to earnings is 33.49 against a median of 28.92, and enterprise value to EBITDA is 25.26 against 19.69. The discounted cash flow value is 178.69 USD per share at a discount rate of 9.73%, and the fair value from historical multiples is 199.83 USD. The reverse DCF implies revenue growth of 12.2% a year, against 10.27% delivered over five years. Free cash flow per share grew 6.72% a year over the same period.

The case rests on a few strong numbers: interest coverage of 18.42, an Altman Z-score of 4.63, and free cash flow conversion of 1.11 over five years. The weakest are net debt to EBITDA of 2.61, a return on invested capital of 9.58% barely above a WACC of 9.08%, and a price that already assumes growth above what the company has delivered.

Financial health

Financial strength is green, supported by interest coverage of 18.42 and a current ratio of 1.43, while net debt to EBITDA of 2.61 is only neutral. The quick ratio is 0.76 and debt to equity is 0.60. The Altman Z-score is 4.63, in the safe zone; the model was built for manufacturers, and AMETEK is one. Insolvency risk is low, about 0.1% by the estimate of the Ohlson model over one to two years. The company's debt has fallen over the last five years, with a change of -11.2% a year in debt against revenue growth. Taken together, these figures show a balance sheet with comfortable room to service its borrowings.

Earnings quality

Earnings quality is green. Free cash flow conversion is 118.5% on a trailing basis and 111.3% over five years, and the accrual ratio is -0.021, which means cash earnings run ahead of reported profit. Stock-based compensation is 0.61% of revenue, and free cash flow after it is 1.88 billion USD. The share count has been essentially flat over five years, at a compound change of 0.01%. The Piotroski score is 6 out of 9. The Beneish M-score is -2.44, which is a reading unlikely to point to earnings manipulation. The company beat earnings estimates in all 8 of the last quarters, by an average of 4.2%. Current-year estimates were revised upward by 2.1% over 90 days, with ten upward revisions and none down in the last 30 days.

Profitability

Profitability is green. The operating margin is 26.3%, against a ten-year median of 23.2%, and the net margin is 19.9%, against 18.4%. The gross margin is 36.6%, against a median of 34.6%. Margin stability is 8.0%. Return on invested capital is 9.58% against a weighted average cost of capital of 9.08%, so the spread is 0.5%, which is only neutral. The five-year median ROIC is 12.36%, so the recent spread is narrower than the historical one. The return on equity is 13.95%. The DuPont split shows a net margin of 20.0%, an asset turnover of 0.46 and an equity multiplier of 1.51, so leverage adds only modestly to the return on equity.

Growth

Growth is green. Revenue compounded at 6.4% over three years, 10.3% over five and 6.4% over ten. Earnings per share compounded at 8.5% over three years, 11.1% over five and 10.1% over ten. Revenue grew in 8 of the last 10 years. Free cash flow per share grew 18.3% a year over three years, but only 6.7% over five. Next year's earnings estimate implies growth of 13.0%, with two upward and two downward revisions over the last 30 days. That forecast is above the company's own longer-run growth record.

Valuation

Valuation is red, because the verdict is overvalued and the margin of safety is -20.6%. The price to earnings multiple is 33.49, a premium of 15.8% to its ten-year median of 28.92. Enterprise value to EBITDA is 25.26, a premium of 28.3% to 19.69. Price to free cash flow is 28.27, a premium of 19.2%. The free cash flow yield is 3.54%. The discounted cash flow value is 178.69 USD per share at a discount rate of 9.73%, with a terminal growth rate of 2.5%. The terminal value makes up 55.1% of that figure. The fair value from historical multiples is 199.83 USD. The reverse DCF implies growth of 12.2% a year, against 10.27% revenue growth and 6.72% free cash flow per share growth over five years. The dividend yield is 0.56%, and dividends absorb 15.8% of free cash flow. The fair value band is an estimate built on fixed assumptions, not a price target.

Risks

The largest risk is valuation. If growth falls back toward the five-year record, the reverse DCF expectation of 12.2% would not be met, and the price would have to converge toward the fair value band. Net debt to EBITDA of 2.61 leaves less room to absorb an earnings shortfall than the interest coverage figure alone suggests. A return on invested capital of 9.58% close to the cost of capital of 9.08% means that a small fall in profitability would remove the value created above the cost of capital. The terminal value makes up 55.1% of the discounted cash flow value, so small changes in the discount rate or terminal growth would move the result. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing risk and the drivers of each division cannot be assessed.