📈 Buying a Cash Machine
Our Next Buy
Our Next Buy increased by 10,000% since its IPO.
It’s a serial acquirer with tremendous business opportunities.
The 40% stock price decline offers a lot of opportunities if you ask me.
Acquiring Niche Businesses
There’s an incredible little company in the UK that most investors have never heard of. And it’s quietly compounding wealth by 26% per year since 2007.
I’m talking about a serial acquirer of small, highly specialized scientific instrument businesses. These aren’t flashy tech startups or the next AI sensation. They’re old-school, high-margin, and deeply entrenched in their respective fields. This company buys them, lets them run independently, and enforces strict financial discipline.
These acquisitions typically sell products in niche markets. As a result, Gross Margins are high, and barriers to entry are even higher.
The Secret Sauce: Capital Efficiency
Their edge? A disciplined approach to acquisitions. It focuses on high-margin businesses that throw off cash. Management doesn’t overpay. They don’t buy growth for the sake of it. They buy great companies at great prices—and they don’t interfere too much.
The result? A business that delivers an extraordinary 33.5% organic return on total invested capital (ROTIC).
Financial discipline is another reason this company is a machine. Net Debt to Free Cash Flow sits at a comfortable 3.6x, and Interest Coverage is a robust 11.5x. Even its goodwill-to-assets ratio—a key metric for serial acquirers—is a reasonable 31.4%.
They say companies have a dilemma between choosing for growth or profitability.
The serial acquirer we’re discussing does both:
Gross Profit Margin: 69.0%
EBITA Margin: 34.0%
5-Year Revenue CAGR: 10.8%
5-Year Free Cash Flow CAGR: 12.0%
For the future, I expect EBIT and FCF to grow between 10-16% annually.
This isn’t a moonshot. It’s a slow, steady, and highly predictable compounding machine.
The company we’re discussing trades at a Forward Free Cash Flow yield of 4.4% and a Forward PE of 23.4x:
Our Earnings Growth Model suggests a long-term annual return of 12.1% per year for shareholders.
A Proven Wealth Builder
If you had invested in this company at its IPO in 2007, you’d be up 26x.
Over the last 10 years, the company has compounded its Owner’s Earnings at a 12.6% CAGR.
This is what great capital allocators do: They reinvest wisely, avoid stupidity, and let compounding do the heavy lifting.
Let’s find out which company I’m buying on Monday…