Avantor's Path to Outperformance - Leveraging Debt Reduction and Strategic Acquisitions: Analyst

RBC Capital initiates coverage of Avantor Inc AVTR with an Outperform rating and a price target of $27, highlighting its favorable position with minimal exposure to near-term bioproduction inventory drawdowns.

Avantor is well-positioned to benefit from the attractive healthcare sector of Life Science Tools (LST), offering investors exposure to emerging technologies with low binary risk.

With biopharma's ongoing investments in innovative therapeutic classes like cell and gene therapy, mRNA, and CRISPR gene editing, Avantor is poised to capitalize on the expanding end market.

Unlike its peers, RBC acknowledges Avantor's historical limitations in using M&A for growth. However, improved financials, including debt reduction, margin expansion, and enhanced free cash flow, may enable Avantor to pursue strategic acquisitions.

Avantor's leverage ratio has improved from approximately 7x before its 2019 IPO to 3.9x currently, with an estimated decrease to around 1.5x by FY25, as noted by RBC analysts.

Following the path of successful peers such as Thermo Fisher Scientific Inc TMO and Danaher Corporation DHR, Avantor is expected to deliver strong outperformance as it enhances core operating performance and pursues strategic acquisitions.

Price Action: AVTR shares are up 0.23% at $19.70 on the last check Wednesday.