Revisiting Eurofins Scientific: A global leader in Laboratory Testing services
Over the last months I’ve done a massive restructuring of my portfolio, as many of you will have realized. In my latest portfolio update I talked about my increasing concentration into Software and payments companies, accounting for 70% of my portfolio! I see tremendous opportunity in those sectors due to wide mispricing:
Software: The narrative of enterprise software being disrupted by AI is faulty in my opinion. I agree that easy to switch out software will struggle against AI competition, but mission critical software that runs the back bone of a business won’t be replaced. In order to achieve that you must be either 5 times better or cheaper to account for the operational risk of switching such a system. Nobody wants to have downtime in its operations just to save a few dollars and run the risk of compliance errors or other mess ups. In the bull case, AI reduces development costs at software firms, making them more efficient (but I’m still skeptical if the AI efficiency actually flows through the PnL or just means that developers achieve the same tasks in less time and waste the saved time).
Payments: After rapid growth in the Covid lockdown growth rates are declining from unsustainable highs. Many payment darlings traded at absurd multiples during the bubble but have now slide to undervalued prices. There are however bear cases like the intense competition, commoditization of payments and operational issues in large players like Fiserv.
What if I’m wrong?
You probably asked yourself why I’m talking about payments and software in an article about Eurofins. Well, I want to diversify my portfolio to have a higher robustness in case the pessimism against these two sectors will persist for longer. So the aim is to try and diversify without reducing quality or IRR of the portfolio much.
Software in particular has many aspects that I highly value in businesses, like highly predictable recurring revenues, good working capital dynamics, scalability and high margins. It’s tough to find comparable businesses in more physical businesses. Let’s revisit the investment case for Eurofins and why I passed in June when I first researched the company.
Eurofins business model dive; Eurofins fundamentals dive
A recap on its business model
Eurofins operates in fragmented markets and is the global leader in 4 of its 12 markets, European leader in 3/12 and a strong player in its remaining segments. Such a fragmented and wide industry is a perfect target for consolidators. With around 1,000 laboratories Eurofins has a good market share, but it is estimated that there are around 40,000-70,000 laboratories globally. Large chains only have around 20% of the market share and probably a fraction of all labs are a great fit for Eurofins. That still leaves 5,000+ targets to consolidate over the coming years. With an annual target of 250 million Euros in revenue from M&A Eurofins expects to continue this trend.
Q3 results
Following Covid, a lot of the metrics for Eurofins were distorted. As a large profiteer of the Covid testing hype, Eurofins enjoyed peak utilization in all its facilities and unprecedented margins. These of course compressed in a more normal business environment.
In the first 9 months of 2025, Eurofins achieved 4% organic growth, with an acceleration to 4.2% in Q3. Growth was driven by 8.4% in the rest of the world, but Europe and NA have been decent at 3.5% too. While this still lags the 6.5% organic growth target, it’s a step into the right direction. FX has been a strong headwind with -1.5% contribution from the strong Euro since the Trump tariffs. M&A contributed nicely as well with 31 acquisitions closed to date. Eurofins confirmed all objectives for 2025.
Now let’s look at the reasons why I didn’t invest last time I looked at Eurofins (60€ back then, 57€ now), review the quality score and valuation.