ChemoMetec: A Niche Player with High Growth Potential

ChemoMetec is a Danish company that makes advanced equipment for counting and analyzing cells, which is used by biotech firms, pharmaceutical companies, and researchers working in areas like cell and gene therapy. Its instruments and consumables are important because they help customers get accurate results and make their processes more efficient, especially as the industry moves toward automation. The company has built a strong position in the global cell counting market and is growing its recurring revenue through services and consumables, while also developing new products to meet rising demand in cell and gene therapy and bioprocessing. The question is: Should ChemoMetec be part of your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in ChemoMetec at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of ChemoMetec, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

ChemoMetec develops, manufactures, and sells advanced analytical equipment for cell counting and analysis. Its instruments are designed to optimize workflows and deliver fast, accurate, and reproducible results for customers across applications such as cell and gene therapy, pharmaceutical research and manufacturing, bioprocessing, and quality control in industries like animal semen, beer, and milk. The company’s product portfolio includes the NucleoCounter line of cell counters and the newer XcytoMatic instruments, which enable automation and integration with bioreactor systems. Alongside instruments, ChemoMetec provides related consumables such as cassettes, reagents, and cuvettes, as well as software and services covering validation, installation, and annual servicing. It sells into more than 100 countries, with exports accounting for the vast majority of revenue, and maintains its own sales and support presence in key markets like the United States and Europe. ChemoMetec’s competitive moat is rooted in technology, customer integration, and high switching costs. Its instruments are based on patented technology combining fluorescence microscopy and proprietary software, while the cassette-based workflow simplifies complex processes and reduces user error. The equipment plays a mission-critical role in cell and gene therapy, where cell counting is indispensable, and once systems are validated in production, customers rarely switch. This creates strong lock-in effects, as revalidation is time-consuming and costly. The company has pricing power in its automation-focused XM30 and XM50 instruments, where it faces little or no direct competition, and benefits from recurring revenues through consumables and modular expansions. Customer proximity and support further reinforce loyalty, while in-house production ensures scalability and quality control. By combining technological innovation, regulatory validation barriers, and long-term customer relationships, ChemoMetec has established a durable position in a niche but critical segment of life sciences, with favorable prospects as automation and cell therapies gain momentum worldwide.

Management

Martin Helbo Behrens serves as the CEO of ChemoMetec, a role he assumed in March 2024. He has spent the majority of his career at ChemoMetec, developing a deep knowledge of its organization, products, and markets through a series of leadership roles across finance and operations. He first joined the company’s Group Finance department as an accountant before relocating to the United States in 2021, where he became COO and later CFO of ChemoMetec’s American subsidiary. In these positions, Martin Helbo Behrens played an important role in driving the company’s growth and strengthening its position in the North American market. After nearly three years in the United States, Martin Helbo Behrens returned to ChemoMetec’s headquarters in Allerød in 2023 as Deputy Chief Operating Officer. He was promoted to COO in February 2024 and subsequently to CEO the following month. His appointment came after the previous CEO had served for only a brief period, signaling strong confidence from the board in his ability to lead the company. Since assuming the role, Martin Helbo Behrens has reshaped the executive management team and initiated several organizational adjustments. His leadership has emphasized sharpening the company’s sales strategy and accelerating product development, particularly within bioprocessing, which represents a critical growth opportunity for ChemoMetec in the years ahead. Martin Helbo Behrens’s career path reflects both continuity and adaptability. Having risen through the company’s ranks and proven his ability to deliver results in diverse roles and geographies, he brings a comprehensive understanding of ChemoMetec’s operations and long-term ambitions. While his tenure as CEO is still in its early stages, his background suggests that he is well-positioned to guide ChemoMetec through its next phase of expansion and to reinforce its leadership in the niche but strategically important field of cell counting and analysis.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. ChemoMetec has historically delivered a high ROICl because of the nature of its business. Its products are mission-critical in areas like cell and gene therapy, where cell counting is indispensable. Once a customer validates ChemoMetec’s instruments in production, they almost never switch, which creates strong customer lock-in. On top of that, the company enjoys high margins thanks to premium pricing, recurring sales of consumables, and limited competition, especially in automation where it has been one of the only players. Since production and R&D are relatively capital-light compared to the profits generated, the company has been able to turn invested capital into returns above average. The peak in ROIC in fiscal 2022 reflected a period where revenue was growing strongly and the capital base was still relatively small. Since then, ROIC has come down because ChemoMetec has invested heavily in expanding capacity, R&D, and new automation products. Those investments increased the capital base faster than profits in the short term. At the same time, margins came under some pressure in 2023 and 2024 as growth slowed and costs rose, which further weighed on returns. In fiscal 2025, ROIC improved again because revenue and earnings picked up. Higher sales meant that fixed costs and earlier investments were spread across more volume, margins recovered, and the mix of consumables and high-value products supported profitability. With less new capital being added in that period, the return on capital moved higher compared to 2024. Looking forward, ChemoMetec’s ROIC is likely to remain at an attractive level, though not necessarily back to the extraordinary highs of 2022. The company is well positioned in a growing market where automation is becoming more important, which supports both revenue growth and pricing power. At the same time, continued expansion in automation systems and bioprocessing will require new investments, which could temporarily hold back ROIC. If management maintains its focus on capital discipline and high-margin products, the long-term outlook suggests that ROIC can trend upward again, even if it moderates compared to the peak years.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. ChemoMetec has managed to grow its equity every year for the past decade because its business model consistently generates high profitability and strong cash flows. The company operates in a niche where its instruments are essential, margins are high, and customers tend to stay once systems are validated. That combination has allowed ChemoMetec to post steady earnings growth and reinvest profits back into the business, which in turn lifts equity. Since the company has little need for debt financing, most of its growth has been funded organically, further supporting a solid equity base. This trend is likely to continue as long as the underlying drivers remain intact. Demand for cell counting and automation in cell and gene therapy is growing, consumables provide recurring high-margin revenue, and the company has shown discipline in capital allocation. However, future equity growth depends on ChemoMetec’s ability to sustain profitability while investing in expansion. If growth in automation products and bioprocessing continues as expected, equity should keep compounding. The pace might fluctuate from year to year depending on margins and investment needs, but the long-term trajectory points to continued equity growth.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. ChemoMetec has been able to grow its free cash flow in most years over the past decade because its products generate high profits and the business does not require a lot of capital to run. Once customers adopt its instruments, they stay for the long term, and recurring consumable sales provide steady income. This means that most of the company’s earnings convert into cash. Free cash flow was negative in 2016 because ChemoMetec was still relatively small and investing heavily in capacity and product development, and it fell in 2023 and 2024 as profitability declined and the company put more money into R&D, facilities, and working capital. Since 2019, the company has delivered a high levered free cash flow margin because revenue growth allowed fixed costs to be spread over more sales, consumables lifted margins, and operations became more efficient. In 2025, ChemoMetec reached record-high free cash flow and levered free cash flow margin as sales and earnings rebounded strongly. Looking ahead, free cash flow should continue to grow as demand for automation in cell and gene therapy expands and recurring consumables sales increase. The growth rate will depend on how much ChemoMetec needs to invest in new capacity and systems, but the overall trajectory looks positive. The company mainly uses its free cash flow to invest in product development and production efficiency, while also paying dividends to shareholders thanks to its strong cash generation and low need for debt. ChemoMetec has historically traded at a low free cash flow yield, which suggests that the shares are always trading at a premium. We will revisit this when discussing valuation later in the analysis.

Debt

Another important aspect to consider is debt. I assess whether a business has a manageable level of debt by looking at whether it could be repaid within three years of earnings. In ChemoMetec’s case, the company has no debt. I prefer investing in companies without debt because they have the flexibility to pursue new opportunities quickly without needing creditor approval and are generally better positioned to withstand economic downturns, since they are not weighed down by repayment obligations.

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Risks

Macroeconomic factors is a risk for ChemoMetec because its growth depends heavily on industries that are capital intensive and sensitive to financial conditions. A large share of its customers are small and medium-sized biotech companies that rely on raising external capital to fund research, clinical trials, and production facilities. When interest rates are high or financial markets are uncertain, these companies struggle to secure funding, and in recent years this has made it harder for many biotech firms to invest in new projects. As a result, some have scaled back on purchases of instruments and technology, directly reducing demand for ChemoMetec’s products. This is particularly relevant in cell and gene therapy, where early-stage start-ups were once a strong source of growth but are now finding it much harder to attract capital. By contrast, larger pharmaceutical companies are generally more resilient, but if funding stays tight in the smaller biotech segment, the overall pace of growth in cell and gene therapy could slow, limiting ChemoMetec’s ability to sell new instruments. Another layer of risk comes from ChemoMetec’s significant exposure to the US market. Around 60% of revenue is denominated in US dollars, making the company highly sensitive to currency fluctuations. A weaker dollar would reduce reported earnings, while changes in US trade policy, such as tariffs, can also affect results. Although tariffs have so far been manageable because the physical production cost of the instruments is relatively low, the uncertainty surrounding US policy remains a potential headwind. Geopolitical instability adds to the picture. Events that increase global uncertainty often cause customers to delay or cancel purchases of capital equipment. For ChemoMetec, which sells high-value instruments that require validation and long-term commitments, even short periods of customer hesitation can have a noticeable impact on sales.

Product development risk is a risk for ChemoMetec because the company’s success depends on its ability to consistently deliver innovative instruments that meet the high standards of customers in biotechnology, pharmaceuticals, and cell and gene therapy. Developing such products is inherently complex and involves overcoming technological, design, and intellectual property hurdles. Even with significant investment in research and development, there is no guarantee that a new instrument will perform as intended, integrate smoothly into existing customer workflows, or gain the necessary regulatory and process validation approvals. Any delay in development or failure to bring a product to market on time can weaken ChemoMetec’s competitive position, especially in fast-moving areas like automation, where being first to market with a robust solution can provide years of advantage. Financially, product development requires substantial upfront spending, but the payoff only comes if the new product is successfully commercialized. A failed development project or an underperforming launch can therefore weigh heavily on profitability and returns. This risk is heightened by the fact that ChemoMetec’s growth strategy relies on the successful expansion of its product portfolio, particularly through automation and integration into bioprocessing workflows. If development projects are delayed, encounter unforeseen technical challenges, or fail to meet customer expectations, the company could lose momentum and open the door for competitors. Given that ChemoMetec’s strong market position has been built on technological innovation, its future growth is closely tied to its ability to manage product development risk effectively.

Frequent changes in leadership is a risk for ChemoMetec because it creates instability in strategic direction and execution. Since its IPO in 2007, the company has had eight different CEOs, with one of the most recent lasting only eight months. Such turnover makes it difficult to maintain a consistent long-term vision, as each new leader may introduce different priorities and management styles. This lack of continuity risks slowing execution of key initiatives, undermining the company’s ability to follow through on its strategy, and creating uncertainty among employees, customers, and investors. For a business like ChemoMetec, which relies on sustained investment in innovation and close customer relationships, frequent leadership changes can also disrupt product development timelines and delay the introduction of new technologies. Externally, stakeholders may view repeated CEO turnover as a signal of instability or deeper organizational challenges. Investors could question the board’s ability to find and retain the right leadership, which in turn may weigh on confidence in the company’s prospects. Customers and partners, especially in highly regulated fields like biotechnology and pharmaceuticals, may also hesitate to commit to long-term agreements if they perceive the company as lacking stable leadership. Internally, frequent leadership changes can affect morale, with employees uncertain about the company’s direction or worried about shifting priorities. For a technology-driven company competing in fast-evolving markets, these factors can slow momentum and weaken its competitive position. Over time, the risk is that ChemoMetec may lose opportunities to competitors who benefit from more stable, consistent leadership.

Reasons to invest

Favorable market trends is a reason to invest in ChemoMetec because the company is positioned at the center of a rapidly growing industry. Cell and gene therapy has matured significantly over the past decade, moving from an experimental field into one with increasing numbers of approved therapies and a steadily expanding pipeline of clinical trials. Today, there are more than 3.000 ongoing trials, and several new treatments, particularly CAR-T therapies, have already received regulatory approval, some even moving into second-line cancer care. This trend not only expands the patient base but also validates the commercial potential of these therapies. As new therapies reach the market and more patients receive treatment, the need for precise and validated cell counting grows, directly benefiting ChemoMetec, since many approved therapies already rely on its instruments and consumables. The expansion of cell and gene therapies into new areas such as rare and autoimmune diseases further broadens the long-term market potential. Larger biopharmaceutical companies, which make up a growing share of ChemoMetec’s customer base, have continued to attract the capital needed to advance these projects, even when smaller start-ups faced funding challenges. Their ability to push forward with development and production creates steady demand for ChemoMetec’s instruments and consumables. Another important element is the network effect within the industry. Key opinion leaders and established customers often influence adoption decisions, and ChemoMetec benefits when its products are validated by leading companies and then spread by word of mouth across the sector. Beyond cell and gene therapy, demand is also expected to rise in bioprocessing as the industry seeks more automation and cost efficiency. ChemoMetec, already among the two largest players in the global cell counting market, is well positioned to capture additional market share as these favorable trends play out.

Launching new products is a reason to invest in ChemoMetec because innovation is at the heart of the company’s growth strategy and competitive positioning. ChemoMetec continually develops new instruments and upgrades existing ones to meet the evolving needs of its customers, often in close collaboration with them. This direct feedback loop increases the likelihood that new products will be successful, as they are tailored to solve specific problems and integrate into existing workflows. In recent years, ChemoMetec has launched several instruments on its XcytoMatic platform, including the XM30, XM40, and XM50, which target automation in cell and gene therapy and bioprocessing. These products respond to a clear market shift toward fully automated production, where companies seek to lower costs, increase capacity, and reduce errors by minimizing manual processes. For ChemoMetec, the transition to automation opens up entirely new markets, particularly in bioprocessing, where it previously had little presence but now sees attractive opportunities against limited competition. The launch of the NC-203, an upgraded version of the cassette-based NC-202, and the Xcyto 5, an image-based analyzer used in areas like CAR-T therapy quality control, broadens ChemoMetec’s product range and highlights its ability to innovate both in existing and new markets. The company is also developing a Sample Management System that will automate the entire process from taking samples in bioreactors to analyzing them. If successful, this system could greatly improve efficiency in cell and gene therapy manufacturing by cutting labor costs and increasing production capacity. By continuously refreshing its product offering and expanding into adjacent markets, ChemoMetec not only strengthens its relationships with existing customers but also gains access to new revenue streams. Since many of its customers are large pharmaceutical and bioprocessing companies with long-term automation projects, the validation cycle may take time, but once adoption happens, it often results in long-lasting demand.

Services and consumables are a strong reason to invest in ChemoMetec because they create a steady and recurring source of income that is less dependent on the timing of new instrument sales. Every instrument sold increases demand for consumables such as stains, rinses, disposable cassettes, and test kits, which are required for the equipment to function properly. This makes consumables an essential part of the customer’s workflow and ensures repeat purchases over time. Similarly, service contracts covering installation, maintenance, and upgrades provide long-term value for customers while generating predictable recurring revenue for ChemoMetec. As the installed base of instruments grows, sales of services and consumables expand with it, giving the company a resilient revenue stream that helps smooth out fluctuations in instrument sales. Looking forward, ChemoMetec also sees significant potential in software as an additional recurring revenue stream. The company envisions selling software licenses alongside its instruments, similar to how service plans are structured, with yearly fees for each instrument connected to its platform. As automation becomes increasingly important in cell and gene therapy and bioprocessing, software will be the foundation that enables these workflows to run efficiently. By combining hardware, consumables, services, and software, ChemoMetec aims to transition from being primarily a cell counting company to a broader solutions provider. This shift not only improves margins but also deepens customer dependence on its ecosystem, making services, consumables, and software together a key driver of sustainable growth.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 10,71, which is from fiscal year 2025. I have selected a projected future EPS growth rate of 15%. Finbox expects EPS to grow by 20,3% a year in the next five years, but 15% is the highest number I use. Additionally, I have selected a projected future P/E ratio of 30, which is twice the growth rate. This decision is based on ChemoMetic's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be DKK 321,30. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy ChemoMetic at a price of DKK 160,65 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 207, and capital expenditures were 30. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 21 in our calculations. The tax provision was 54. We have 17,4 outstanding shares. Hence, the calculation will be as follows: (207 – 21 + 54) / 17,4 x 10 = DKK 137,9 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With ChemoMetec's Free Cash Flow Per Share at DKK 10,20 and a growth rate of 15%, if you want to recoup your investment in 8 years, the Payback Time price is DKK 161,02.

Conclusion

I believe that ChemoMetec is an intriguing company with a good management. The company has built a moat through its technology, customer integration, and high switching costs, and it has consistently achieved a high ROIC, a trend that is expected to continue. In fiscal year 2025, ChemoMetec delivered its highest free cash flow and levered free cash flow ever, which bodes well for the future. Still, there are risks to consider. Macroeconomic conditions can weigh on the company because many of its customers, especially smaller biotech firms in cell and gene therapy, rely on external funding that becomes harder to secure when interest rates are high or markets are unstable. Together with ChemoMetec’s significant exposure to the US dollar, potential tariffs, and geopolitical uncertainty, this can reduce demand for its instruments and create volatility in sales. Product development is another risk since growth depends on bringing new, complex instruments to market successfully, and delays or failed launches could hurt profitability and weaken the company’s position in automation. Frequent leadership changes also pose a risk, as eight CEOs since its IPO have made it harder to maintain strategic consistency, potentially slowing innovation and raising concerns among investors and customers about stability. On the positive side, favorable market trends are creating strong tailwinds, as cell and gene therapies continue to gain approvals and expand into new disease areas, while bioprocessing increasingly embraces automation, all of which drive rising demand for precise cell counting and analysis. ChemoMetec is also strengthening its growth through product launches, with new instruments like the NC-203, Xcyto 5, and its upcoming Sample Management System opening new markets and deepening customer relationships. Beyond instruments, services and consumables provide recurring revenue that grows with the installed base and offers resilience when instrument sales fluctuate, and the company’s push into software subscriptions is expected to further enhance margins and customer loyalty. Taken together, I believe ChemoMetec is a high-quality company with attractive growth prospects, but the shares have historically traded at a premium, so I would only open a small position at the intrinsic value of the Margin of Safety price of DKK 321.

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