Eurofins Scientific FY2025 Review
Eurofins Scientific $ERF.PA, a long holding in the DInvests portfolio recently published their Q4 and Full year results. In this review, I will dive into the results and also see if the company executed on its business objectives for the year.
Here’s a quick summary of the business if its new to you,
Eurofins is a world leader in food, environment, pharmaceutical and cosmetic product testing offering a portfolio of over 200,000 analytical methods for evaluating the safety, identity, composition, authenticity, origin and purity of biological substances and products. They operate over 950 laboratories in 60 countries with a decentralised business model promoting an entrepreneurial culture promoting closer customer relationships at the local level. Growth is fuelled by organic growth from higher demand for its services and also through acquisitions. The company is still run by its founder Giles Martin who’s, in my opinion, one of the best capital allocators when I compare businesses inside my portfolio and to which I’ve researched. The company thinks long-term with capital allocation decisions in turn sacrificing short term profits.
A) Financial Performance
Eurofins Scientific delivered strong operating performance in 2025 and the stock price mirrored it with a return in the last year of 30% (Exc dividends). My followers will know I’ve been long Eurofins since 2024 and have written many articles about the business since.
Reported revenues came in at €7,296Bn which was an increase of 5% y/y with 4.1% of this organically. The main drivers of the increase came from the businesses Life Segment which grew 6.1% organically and crossing €3Bn in revenues for the first time during the year. Also with moderate increases in their other Segments (BioPharma 1.4%, Diagnostic Services & Products 2.6% and Consumer & Technology Products Testing 2.3%) and a pro-forma increase through acquisitions of €286 million.
Adjusted EBITDA (Eurofins preferred profitability metric) was €1,641m, 6% higher than 2024. This represents a margin of 22.5% and 20 basis points higher than the prior year driven by volume growth and cost efficiencies. Adj Ebitda margin on matured operations came in at 24.3% of revenues, way ahead of their target for 24%. These mature results exclude start-up laboratories which are currently dilutive to the company but as time passes, will be accretive once matured which usually takes 3 years. Separately Disclosed Items (SDI) which Eurofins emphasise was 1.1% of revenues instead of 1.5% in 2024, these costs represent the one-off costs usually associated with start-up investments, acquisitions and essential restructurings.
Net Earnings totalled €473 million or €2.31 per share. This represents an increase over the prior year of 17% and 24% respectively, the latter came in 7% higher due to Eurofins share count reduction following opportunistic repurchases.
Free cash flow to the firm came in at €876 million a y/y increase of 9%. These results include the discretionary purchases of investments in owned sites which totalled €195 million during FY 2025. Excluding these investments, FCFF would have resulted €1,071 million.
When deducting leases and principal payments from operating cash flow, Free cash flow to equity (*Free Cash Flow to Equity = Free Cash Flow to the Firm - interest and principal lease payments.*) came in at €576 million including investments in owned sites and €771 million without. The company includes these investments to gives investors a scope of the actual maintenance requirements to keep the business competitive. Once these discretionary investments have passed, FCF should boost materially. I’m thinking post 2027.
Return on capital employed (ROCE) increased 180 basis points Y/Y to 12.8%. This was contributed by improved profitability with EBITDA increasing higher than capital employed and Eurofins coming towards the end of their investment cycle. Excluding goodwill and intangibles (A common flaw for serial acquirers, ROCE would have reached 34.1%).
B) Growth
As I covered in my article covering Eurofins “Link here”. Eurofins growth comes organically through increased volumes, bolt-on acquisitions and start-up laboratories in high growth areas “Start-ups, a favoured option gives Eurofins the benefit to choose which markets to enter with zero goodwill, a line item on the balance sheet which is essentially the price paid to the acquired company over the value of tangible assets. The downside is the time start-ups take to reach full capacity which results in them operating at a loss during the first few years”.
To put into context, during the past 11 years, Eurofins have acquired over 390 businesses and opened over 333 start-ups since 2000.
During 2025, Eurofins spent a total of €261 million on 40 acquisitions. The largest being SYNLABs Spain Clinical Diagnostics operations which contributed €130 million in revenues of the €286 million in revenues acquired. Adjusted Ebitda from these acquisitions was €19 million. This equates to a Price/Sales of 0.91x and a P/AEBITDA of 13.7x as a group.
Start-ups launched during the year totalled 14 new laboratories. Start ups are initiated when acquisitions become too expensive due to the high growth areas in which they operate. Since the start of this rollout, a total of 333 start ups have been opened and in 2025 contributed to 0.6% of the total organic growth obtained. In the image below we can see the progression in profitability of these start ups as operations ramp up. These typically start becoming profitable during and after year three. 132 start-ups have been opened within the last three years so the company is expecting the former of these “Opened in 2022,2023” to start to become accretive to profitability in the near future.
C) Capital Allocation
This is where things get interesting. Eurofins has many of uses of its capital. During any given year they use their disposable cash to acquire businesses, start-ups, re-purchasing shares, investing in owning their own sites, IT solutions and dividends. Lets look into the capital deployment over 2025.
Owned sites
Eurofins spent a significant amount investing in their owned sites in 2025. Their investment strategy involves owning more and leasing less which, over the long term will be highly beneficial to the company as wasted capex in lease improvements and reliance on landlords will be minimal. During 2025 a one-off payment of €298 million to acquire 31 related party-owned strategic campuses across eight countries (United States, France, Germany, Denmark, Spain, Netherlands, Belgium, and Ireland) from Analytical Bioventures who is owned by the Martin family. Debt was issued to fund this transaction after approval from shareholders. This eliminates any conflict of Eurofins paying rent to its own founders. Excluding the 31 strategic campuses, Eurofins added approximately 40,000 m² of owned surface area through third-party acquisitions and the development of new sites in 2025 for a total purchase price of €195 million.
Acquisitions
2025 was another active year on the acquisition front. A total of 40 business combinations were acquired for a total purchase price of €261 million. The largest of these deals was Synlab’s clinical diagnostics operations in Spain, which closed in March 2025. This business generated approximately €140 million in pro-forma revenues for 2024 and included a major 10,000 m² state-of-the-art laboratory in Barcelona. In total, the 40 businesses combined generated total revenues of €284 million and €19 million in Ebitda in 2025. Looking ahead, Eurofins still expects to acquire €250 million in revenues annually going forward.
Share Repurchases and dividends
Eurofins share price suffered a major decline 2024 due to a short sellers report on the company alleging extensive financial malfeasance and siphoning of funds through real estate transactions. The stock price dropped to a low of €46 in 2025 to then climb back to €73 with a 58% gain after excellent business execution and auditors claiming no material misstatements were found in the financial statements. The reason I’ve come to mention this is in part due to the accelerated repurchases from the company during times of stock price weakness. During the year a total of over 10 million shares where repurchased or 5.5% of share capital. To give you a sense of activity, when the stock price was below €50 the company would be purchasing 250,000 shares in regular intervals and when it reached €60 smaller tranches where initiated, typically 50,000 shares or less. This shows management deploys more capital to buybacks when the stock price is materially lower. I know this sounds like common sense but not many executives act this way but rather make repurchases routinely regardless of price. The share reduction alone in 2025 increased EPS by 7%.
Start-Ups
Organic growth typically comes from start-up laboratories which are targeted and opened in high growth areas where typically acquisitions are too expensive. There’s positives and negatives here.
First, start ups have zero goodwill which in a scenario of an acquisition, sits on the balance sheet and lowers return metrics such as ROCE and ROIC.
The negative comes from the fact these new start-ups take approximately 3 years to become profitable. Once matured, these businesses will contribute to the companies long term target of EBITDA margins of 24%, a target the matured group achieved in 2025.
During the year Eurofins opened a total 14 new start up laboratories and 38 blood collection points. A total of 132 Labs have been opened since 2022 with a large bulk now entering profitability and contributing to the companies profitability.
C) Conclusion
Despite the market reaction to the Q4 and full year report, I believe Eurofins had an excellent year operationally and management deployed capital efficiently. The most appealing factor is their focus on long-term investments that sacrifice short-term profits. Their start-ups and the investments in owned sites are a classic example and we are now starting to see the benefits of these.
Some of Eurofins end markets such as biopharma should pick up in future quarters to similar growth rates as their Life segment bringing their overall organic growth rates back to where management guides to around 6.5% annually with the added guidance of €250 million of acquired revenues. These resilient revenue streams are backed by increased strict regulations around food and other consumable items which should drive growth for many years into the future.
After just finishing their 3rd year of their 5th year in this investment cycle, we should start to see earnings and cash flow rise materially. Matured start ups will start to become profitable, their buildout of their hub and spoke network will start to become more efficient, less investments in owned sites and the full digitalisation of the lab network is scheduled for completion. These will lower costs per test, operating IT costs and lower rent on leases. All structural marginal gains to profitability and all because of this long-term mindset. Eurofins is unique in this regard.
2026 Guidance
Revenues - MSD
Adj Ebitda margins - Expected to be above 2025 level of 22.5%
Free cash flow - Expected to growth above 2025 levels.
For the mid-term, post 2027 the company is expecting revenues to organically grow 6.5% annually with Adj Ebitda margins to be 24% or above. FCF and ROCE are also expected to increase further.
The business looks like its in good hands. Long Eurofins.
D) Valuation
It’s that time again to re-evaluate Eurofins intrinsic value. As always these assumptions and model are purely based on my preferred method and my expectations for the business moving forward.
I will be using an exit multiple model based on their Ebitda. I believe this to be the right option as they have large amounts of amortization and depreciation in which they incur large non-cash charges every year. This is due to the intense capital expenditures and their highly active acquisition strategy in which they incur large amounts of amortization.
During 2025, I believe Eurofins increased its intrinsic value by 8.8% to $86 per share. One headwind affecting its intrinsic value was the increased debt load during the LTM which gets deducted to come to an equity value.
I’ve also projected Eurofins potential future stock price in 2030. The highlighted column includes potential revenues from acquisitions (5 x €250m which management guided) and the other being purely organic revenues of 6.5% annually. With margins rising to 22.5% and an exit multiple of 12.5x we have two price targets of €124 and €140 in 2030. Share count is reduced by 1% per year which can be considered conservative as the business will have completed its investment cycle resulting in more discretionary cash to distribute to shareholders. I believe the share count to be materially lower.
With todays share price of €68.4, the IRR on Eurofins for my assumptions are between 12.7% and 15.5%. This all depends on revenue growth and the acquired revenues as I mentioned above. This excludes dividend returns which yields 1.1%
As a shareholder I’m pleased with how the business performed in 2025. 2026 will be another year of heavy investment for Eurofins with more planned investments in their owned sites, start ups and their IT solutions. Personally I hope the price weakness persists so management can take further advantage of the attractive share repurchases which will massively benefit the shareholders of today and in the long term.
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I hold a beneficial position in Eurofins Scientific stock $ERF.PA . My buys and sells aren’t recommendations. I can’t guarantee the accuracy of the information provided in the newsletter. All statements express personal opinions and information gathered online. Any estimates, forward looking statements and assumptions made in this newsletter are unreliable. Always do your own research. Any information in this newsletter is for educational and entertainment use only and should not be taken as investment advice.