Danaher’s 24.7% return over the past six months has outpaced the S&P 500 by 14.7%, and its stock price has climbed to $234.55 per share. This performance may have investors wondering how to approach the situation.
Is now the time to buy Danaher, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Danaher Not Exciting?
We’re happy investors have made money, but we're swiping left on Danaher for now. Here are three reasons there are better opportunities than DHR and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing Research Tools & Consumables companies. This metric gives visibility into Danaher’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Danaher’s organic revenue averaged 1.6% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Danaher might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Danaher’s margin dropped by 4.5 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. Danaher’s free cash flow margin for the trailing 12 months was 20.7%.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Danaher’s ROIC averaged 4.4 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Danaher’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 29× forward P/E (or $234.55 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Danaher
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The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
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