Azenta trades at $34.56 and has moved in lockstep with the market. Its shares have returned 12.3% over the last six months while the S&P 500 has gained 11.7%.
Is now the time to buy Azenta, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
Why Do We Think Azenta Will Underperform?
We're cautious about Azenta. Here are three reasons you should be careful with AZTA and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Azenta’s demand was weak and its revenue declined by 4.8% per year. This was below our standards and is a sign of poor business quality.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Azenta, its EPS declined by 18.8% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. Cash Burn Ignites Concerns
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
While Azenta’s free cash flow broke even this quarter, the broader story hasn’t been so clean. Azenta’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 14.2%. This means it lit $14.20 of cash on fire for every $100 in revenue.
Final Judgment
Azenta doesn’t pass our quality test. That said, the stock currently trades at 44× forward P/E (or $34.56 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. Let us point you toward a top digital advertising platform riding the creator economy.
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