Hey everyone, welcome back to the channel. Today, we’re diving into Mettler-Toledo International, ticker symbol MTD—a request that came in through the comments section of one of my recent videos. And as always, if you’ve got a stock you want me to take a look at, just drop it down in the comments.
So let’s talk about Mettler-Toledo. This is one I do follow, even though I haven’t made a public video on it until now. The company operates in a pretty specialized niche—precision instruments, lab equipment, weighing systems. And what really stands out when you look at this business is the consistency of its performance over time.
In MTD’s case, we’re using a static PE of 15 to anchor the comparison, and that line stays flat. It’s helpful because it gives us a visual benchmark of where the market tends to price this company over time relative to its earnings.
HISTORICAL PERFORMANCE
Here’s what makes Mettler-Toledo really impressive: its earnings barely flinched during two of the most disruptive periods in recent history. In 2009, during the Great Recession, earnings fell just 4%. That’s a rounding error compared to what happened to most companies. And again, post-COVID, they dipped another ~4%. That’s it.
Meanwhile, the company has grown earnings from around $3 per share to over $30 per share. That’s a 10x increase in bottom-line performance. And given the stock’s trajectory, you’re probably looking at closer to a 20x in terms of total return on the stock price side. So this isn’t just a high-quality business—it’s been a phenomenal long-term compounder.
VALUATION AND MARKET DYNAMICS
But here’s the catch: the valuation has gone parabolic. This is something I’ve talked about before with other high-quality compounders like Costco, McDonald’s, and a few others. When a company consistently delivers year after year, it builds up a base of long-term holders who just don’t want to sell. They’ve made a ton of money, they’ve got big unrealized gains, and the business has treated them well. Why sell a winner?
And over time, that turns into a sentiment cycle—a term I use for these long stretches where investor psychology drives the price further and further away from traditional valuation anchors. It’s a lot like reflexivity, which is George Soros’s idea that price and fundamentals don’t just reflect each other—they can actually reinforce each other. As the price rises, the business looks more attractive, attracts more buyers, and the price rises even more.
Now, MTD fits this pattern almost perfectly. If you go back before the Great Recession, the company had 20%+ earnings growth, but the stock was trading at a PE of 25. That’s a PEG ratio of 1—totally fair.
Stretch that window to the last 10 years, and here’s what happens: earnings growth slows to 12%, yet the average PE jumps to 32. At the bubble peak, it was even trading at 50 times earnings. That’s not just rich—that’s nosebleed territory, especially considering the growth rate has come down.
Setting the Stage: Looking Back to Move Forward
Let’s step back and take a broader view of what’s going on here. We’re going to go back to 2021, and even a few years before that, so we can build a clear picture of how this business has been growing and what the valuation has looked like over time. Because once we understand that, we’ll see why this current setup is so tricky — and potentially dangerous — for investors who aren’t paying close attention.
Strong Historical Growth, But Not Hyper
Starting with the basics: this company had been growing earnings at around 15% per year. That’s solid. That’s not crazy hyper-growth, but it’s very strong and sustainable — the kind of growth you want from a well-run, mature business. This isn’t some fly-by-night speculative name. It’s a company with real products, real cash flow, and a multi-year track record of consistent execution.
PEG Ratio Reality Check
Now, if you apply a basic PEG ratio lens — that’s the P/E ratio divided by the earnings growth rate — a 15% grower should maybe trade at a 15 to 20 P/E, depending on how optimistic the market is. A PEG of 1.0 is considered a fair baseline. If the company is particularly high quality — great margins, strong brand, competitive moat — you might stretch to 1.5, maybe even 2.0 in a favorable market.
50x Earnings: Valuation Gone Wild
But what we saw in 2021 was a P/E of 50. Let that sink in. That’s a PEG of over 3.3. That’s not just rich — that’s speculative. That’s a valuation that implies years and years of uninterrupted compounding, near-perfect execution, and no macro hiccups. And if anything goes wrong — even a minor disappointment in growth or a shift in market sentiment — that kind of multiple can collapse in a hurry.
What It Should Have Been Worth
For context, a 30 P/E on a 15% grower would already be pushing the upper end of what's justifiable. So a 50 P/E is 65% higher than even that aggressive scenario. It’s just not grounded in reality. At $1,700 per share, a fair value based on a 15 P/E would’ve been closer to $500–510. That’s the kind of discount that long-term investors dream about — buying a great business at a third of the price.
When the Air Came Out
Of course, at the time, that kind of thinking didn’t seem urgent. Everyone was riding the post-COVID growth wave, liquidity was everywhere, and the market was rewarding momentum and narrative over fundamentals. But eventually, the music stops. It always does. And when it did, the stock dropped more than 40%. But here’s the kicker — earnings only declined about 4%. That’s barely a dent. This wasn’t an earnings collapse. It was a valuation correction.
The Hidden Risk of Overpaying
This is a crucial point that often gets missed: overpaying doesn’t always hurt you right away. The real risk isn’t necessarily a short-term crash. It’s long-term stagnation. It’s buying a great company at the wrong price and then watching it go nowhere for years — even as the business itself keeps chugging along.
6 Years, 0% Real Returns
From the peak in mid-2019 to today — almost six years — the stock has basically only kept pace with inflation. We’ve had over 20% cumulative inflation since then, and that’s roughly what this stock has returned. So in real terms, investors who bought the peak and held through today have earned… nothing. Meanwhile, the S&P 500 has doubled. Even a plain old index investor has significantly outperformed.
Most Investors Don’t Even Realize It
And what’s worse is many investors don’t even realize it. They see they’re still up a bit, or maybe back to breakeven, and they feel like they survived the storm. But they’ve missed years of compounding elsewhere. That’s the real danger of overpaying: the opportunity cost.
Still Expensive — Even After the Drop
Now let’s look at where we are today. After that 40% drawdown, the stock is trading at a P/E of 25. That still isn't cheap — especially considering that earnings growth has slowed into the single digits. It’s no longer a 15% compounder. It’s closer to 5–7% now. And yet the valuation still assumes it’s a premium growth story.
Déjà Vu: Same Valuation as Pre-GFC
For reference, this is the same valuation — a 25x multiple — that the stock had in late 2007, right before the Great Financial Crisis. The difference? Back then, it was growing earnings at 20% a year. Now it’s doing a third of that. So if you're buying today, you’re paying 2007’s price for a business that’s grown slower, in a much more uncertain macro environment. That’s not a compelling setup.
What If History Rhymes Again?
If you want to stress-test this even further, ask yourself: what happened to this stock during the last recession? Because back then, it started from the same valuation it has now — 25x earnings — and still dropped more than 60%. That’s despite earnings holding up pretty well. That same thing could happen again. And if we repeat that pattern, this stock could fall another 60% from here.
My Buy Target: Where Value Shows Up
That aligns with my own buy target, which is roughly 66% lower than the current price. If we don’t get a recession, my more moderate fair value estimate is around $600 a share — still a 45% decline from where it’s trading now.
What the Company Actually Does
Let’s not lose sight of the business itself. This is a high-quality operation. They make scientific instruments, weighing systems, lab equipment — things used by hospitals, research labs, and industrial clients. It’s not going away. But that doesn’t mean it’s recession-proof.
Recession Risk Still Matters
If research funding slows down, if hospitals pull back on capex, if government grants dry up — that all hits demand. The business is resilient, but not immune. So even though it’s down big, I’d argue it’s not cheap. Not yet.
Weak Revenue Trend Post-COVID
And to make matters worse, the recent revenue trend has been flat. That’s over a rolling three-year window, which captures the COVID boom and bust. And while I wouldn’t panic if I were a long-term holder who bought in at a better valuation, I also wouldn’t be looking to add here unless I saw a major change in the macro picture.
The Upside If You Wait for the Right Price
Now, let’s talk upside. If you bought this company at the depths of the last cycle, you made 20x on your money. That’s the power of buying great businesses at the right price. Even if it doesn’t do that again, there’s still a lot of potential if you’re patient.
Size & Room to Grow
It’s a $20 billion company today. If you could pick it up at a $10 billion valuation — somewhere around that $600 share price — you’d be getting a margin of safety and upside potential that actually makes sense.
Conclusion
So here’s my bottom line:
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If you already own it, and you bought it at a reasonable valuation, you’re probably fine. Just don’t get lulled into thinking it’s cheap now — it’s not.
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If you’re looking to buy, wait. At $600, it gets interesting. Below that, it starts to look like a real opportunity — especially if sentiment has turned bearish and fear is in the air.
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But at 25x earnings, with slowing growth and macro risks on the horizon, it’s not priced for outperformance. It’s priced for disappointment.
Now, I’ve been warning about this kind of overvaluation in quality compounders since around 2018. These are businesses that tend to avoid drawdowns in earnings, and that makes them incredibly attractive in a macro environment full of uncertainty. Investors crowd into them because they look safe—and in many ways, they are. But over time, the price paid starts to matter more than the quality of the business itself.
That’s what I think we’re seeing here with Mettler-Toledo. It’s an amazing company. It’s executed almost flawlessly for over a decade. But it’s trading at a valuation that assumes that perfection continues forever—and at a time when earnings growth has already started to slow.
I haven’t written a full piece on MTD before, but it fits right into the same category as some of the other sentiment darlings I’ve talked about—companies that are great, but where investors might be paying too much for that greatness.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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