$6.50
$13.40
bear $6.50
base $10.90
bull $13.40
margin of safety $5.50
market price* $16.42
Avantor supplies laboratory products, consumables, equipment and services to life sciences customers. It reports two segments: Laboratory Solutions (2025 net sales of $4,399.7 million) and Bioscience Production (2025 net sales of $2,152.5 million, which includes clean-room consumables and formulated products sold to semiconductor customers). Customers are diverse, and about 45% of 2025 net sales came from customers that have bought from Avantor for 15 years or more. What the business earns. We measure owner earnings as operating cash flow, less the swings in receivables, inventory, payables and other working-capital items, less stock-based compensation (a real cost to shareholders), less the part of capital spending needed just to stand still. On that basis owner earnings per diluted share were $1.11 (2019, using a weighted share count of only 401.2 million), $1.39 (2020), $1.54 (2021), $1.45 (2022), $0.98 (2023), $0.88 (2024) and $0.95 (2025). We anchor on the median of 2023 to 2025, which is $0.95 per share. We leave out 2020 to 2022 because sales in those years were higher ($7,386.1 million in 2021 and $7,512.4 million in 2022, against $6,552.2 million in 2025) and that level has since reversed; 2020 also includes a $346.8 million loss on debt extinguishment that is added back. The build reconciles line by line to the reported cash-flow statement for 2020 through 2025. The 2025 net loss of $530.2 million reflects a non-cash $785.0 million goodwill write-down in the Distribution business, which did not touch cash and so does not reduce owner earnings. The 2024 net income of $711.5 million includes a non-cash $446.6 million gain on selling the Clinical Services business, which we also exclude. Nothing here relies on the company's adjusted profit measures. In 2025, operating cash flow fell by $217.0 million, and the company points to higher working capital, customer rebate payments and incentive pay. We treat these as timing, but some may be genuine costs, which is one reason we do not lift the anchor. Trend and what we credit. Net sales have fallen each year since 2022: $6,967.2 million (2023), $6,783.6 million (2024) and $6,552.2 million (2025). In 2025, organic sales fell 2.8%. The company attributes the Laboratory Solutions decline to lower demand for consumables and equipment amid funding uncertainty and stronger competition, and gross profit fell from $2,279.3 million to $2,139.4 million. Owner earnings per share rose 8.6% in 2025 ($0.95 versus $0.88), helped by net interest expense falling to $169.8 million from $218.8 million as debt was paid down. Our first-year growth assumption is 0%, below that trailing rate, because an interest saving is not a repeatable source of growth and sales are shrinking. We credit no growth in any case: nothing in the filings is contracted, and the business has not shown a steady, repeatable pace of expansion. Instead, its earnings power is credited for a limited number of years. Customer relationships are amortized over 10 to 20 years ($301.1 million of intangible amortization in 2025). The amortization is a non-cash add-back, so we carry that wasting-asset risk in how long the earnings last rather than by lowering the level. Base case, $10.90 per share: owner earnings hold at $0.95 per share for 20 years, then nothing. Twenty years matches the top of the customer-relationship life range and the long-standing customer base. Bear case, $6.50 per share: sales and profits keep sliding. Gross profit has fallen two years running and both segments shrank in 2025. Avantor also has $3,967.9 million of debt outstanding, including $2,056.1 million due in 2028, and we assume refinancing costs about two percentage points more, roughly $0.05 per share after tax. We start at $0.90 per share, then decline 7% a year for 10 years, then hold flat through year 20 and end. Bull case, $13.40 per share: the company's own restructuring and transformation costs ($29.8 million and $61.7 million in 2025, $91.5 million in total) roll off, worth about $0.10 per share (roughly three-quarters of that total after tax). Owner earnings of $1.05 per share then hold for 25 years and end. No sales recovery is assumed. What would prove this wrong. The carrying value of the Distribution business now equals its estimated fair value, and the company says further write-downs may be needed if results weaken. Operating cash flow for the first quarter of 2026 was $58.7 million versus $109.3 million a year earlier. This is one quarter, so we have not lowered the anchor, but two or three more weak quarters would. The company also repurchased $75.1 million of its shares in 2025, and we give no credit for that. Price. Given heavy debt, shrinking sales and a base value that rests on no growth, the margin-of-safety price carries a wide cushion. The margin-of-safety price of $5.50 sits below the bear case.