- Profitability: Net Profit After Tax (NPAT) has been trending upward alongside revenue, with recent TTM net income hovering around $10.63M. Profit margins are solid at ~ 17%. [1, 2, 3]
- Debt: Minimal and highly manageable. Debt-to-equity stands at ~ 1.7%, with total liabilities heavily outweighed by short-term investments and cash (around $12.1M). [1]
- Return on Equity (ROE): Has climbed consecutively from ~ 13.7% in 2021 to a recent peak of ~ 18.4%
- Growth: XRF's annual earnings growth rate has outpaced many industry standards. Note , between 2012 to 2017 there was zero revenue growth (bottom of the mining cycle), but in 2018 they started to see their revenue increase.
- Dividend: XRF maintains a consistent payout ratio around 60%, with a trailing dividend yield of roughly 2.5% and 100% franking. the div was low in 2017 - corresponds to a lowpoint in the mining cycle. They are definitely a dividend paying company. [1, 2, 3]
| Year | Approximate P/E Ratio | Valuation Context & Market Sentiment |
|---|---|---|
| 2026 (Current TTM) | 22.5x – 24.8x | Market is pricing in stable high margins and the successful acquisition/integration of Bruker's CGA business. |
| 2025 | 24.8x | Peak historical multiple following exceptional net profit growth (NPAT up to $10.38M). |
| 2024 | 20.8x | Solid earnings growth compression as stock price matched consecutive record quarters. |
| 2023 | 20.8x | Multiple expansion began as mining tech and capital laboratory equipment demand surged. |
| 2022 | 12.7x | Post-pandemic recovery phase; valued strictly as a small-cap industrial manufacturer. |
| 2021 | 12.4x | Subdued multiple due to broader macroeconomic supply chain uncertainties. |
| 2020 | 10.3x | Pandemic market low; briefly dropped to a low of 7.5x before recovering to 10x. |
| 2019 | 11.3x | Low-growth cyclical valuation reflecting mining sector consolidation. |
| 2018 | 12.5x | Consistent dividend payer, but largely ignored by institutional investors due to micro-cap status. |
| 2017 | 13.0x | Baseline historical valuation when the company primarily generated sub-$3M annual NPAT. |
- Current ROIC: ~16.9% to 20.8% (reflecting high capital efficiency and strong compounding returns). [, 2]
- Current WACC: ~7.7% to 9.3% (reflecting low relative debt and a modest cost of equity). [1]
- 10-Year Trend Context: Over the past decade, XRF's WACC has maintained a median of roughly 7.21%, while its post-recovery operational profitability has driven ROIC well into the mid-to-high teens and low twenties. []
- 2025/2026 (TTM): ~26.0% to 29.2%
- 2024: ~25.1% (Calculated from $15.04M EBITDA on $59.85M income)
- 2023: ~24.5%
- 2022: ~23.8%
- 2021: ~21.5%
- 2020: ~18.2%
- 2019: 14.2%
- 2018: 10.1%
- 2017: ~9.5%
XRF Scientific (ASX:XRF) actually passes a surprising number of the Buffett tests. It is much more interesting on a Buffett-style basis than its small size might initially suggest.
One important point first: XRF is not an ASX 200 company. Its market capitalisation is only around $250–260m, so it wasn't included in my previous ASX 200 screen.
But if we remove the ASX 200 restriction, I would definitely put XRF on the Buffett-style small-cap watchlist.
XRF Buffett scorecard
| Buffett test | XRF | Pass? |
|---|---|---|
| Understandable business | Yes | 🟢 |
| Durable competitive advantage | Moderate/Good | 🟢/🟡 |
| High ROE | 16.6% | 🟢 |
| High ROIC | 17.8% | 🟢 |
| Low debt | 0.14× EBITDA | 🟢🟢 |
| Net debt | Net cash | 🟢🟢 |
| Consistent profitability | Yes | 🟢 |
| Rising EPS | Generally yes | 🟢 |
| Strong cash generation | Yes | 🟢 |
| Recurring revenue | Increasing | 🟢 |
| Reinvestment opportunity | Good | 🟢 |
| Management ownership/alignment | Worth investigating | 🟢 |
| Valuation | ~22–23× earnings | 🟡 |
| Margin of safety | Moderate | 🟡 |
| Overall | Quite Buffett-like |
What exactly does XRF do?
XRF Scientific makes equipment, consumables, chemicals and laboratory products used in X-ray fluorescence analysis, mining, metallurgy and scientific laboratories.
Its products include:
- fusion machines
- fusion flux
- laboratory crushers
- reference materials
- platinum laboratory equipment
- analytical instruments
- consumables
The particularly attractive part is the combination of equipment + consumables.
Once a customer has installed XRF equipment, the company can sell consumables and related products to that installed base. XRF specifically says its growing installed base is generating recurring consumables and platinum-labware recycling revenue.
That gives XRF a potentially attractive razor-and-blades characteristic.
1. ROE — PASS
Current ROE is approximately:
16.6%
More importantly, the ROE isn't being manufactured by leverage.
That's critical.
And the recent history is:
| Year | ROE |
|---|---|
| FY22 | 14.8% |
| FY23 | 17.6% |
| FY24 | 18.1% |
| FY25 | 17.9% |
| FY26 | 16.6% |
2. ROIC — PASS
This is even more important.
Current ROIC is approximately:
17.8%
with recent years around:
15.0% → 18.9% → 20.8% → 21.1% → 19.0% → 17.8%
for FY22–FY26.
That's a very respectable return on capital.
I'd classify:
ROIC >15% consistently = Buffett territory
provided the company can maintain it.
XRF passes.
3. Debt — HUGE PASS
This is probably XRF's strongest characteristic.
Current:
Debt/Equity: 0.04×
Debt/EBITDA: 0.14×
Net Debt/EBITDA: –0.44×
In other words, XRF has net cash.
Interest coverage is approximately:
118×
That's an extremely conservative balance sheet.
This is precisely the sort of balance sheet Buffett likes.
And there's an interesting trend: leverage has been falling steadily. Very strong pass.
| Year | Debt/EBITDA |
|---|---|
| FY22 | 0.66× |
| FY23 | 0.45× |
| FY24 | 0.31× |
| FY25 | 0.22× |
| FY26 | 0.14× |
4. Earnings growth — PASS
This is where XRF gets interesting.
Net profit attributable to shareholders:
| FY | NPAT |
|---|---|
| FY22 | $6.08m |
| FY23 | $7.69m |
| FY24 | $8.89m |
| FY25 | $10.38m |
| FY26 | $10.49m |
That's about 11.5% CAGR from FY22–26.
The FY2026 result was more modest, with NPAT essentially flat versus FY25, but the longer-term direction remains positive.
EPS has gone:
4.5c → 5.6c → 6.4c → 7.4c → ~7.8c
So you've got a reasonably good earnings record.
5. Free cash flow — PASS, but with a caveat
Operating cash flow is strong.
FY22:
$3.15m
FY23:
$8.42m
FY24:
$8.09m
FY25:
$10.14m
FY26:
$11.39m.
That's excellent.
However, I wouldn't treat operating cash flow as identical to free cash flow.
XRF has been making acquisitions and investing in the business. FY2026 net investing cash flow was around -$8m, so reported FCF is considerably lower than operating cash flow.
That's one reason I wouldn't call XRF an obvious bargain at 25× FCF.
6. The business moat — this is the weak point
This is where XRF doesn't quite look like REA, RMD or Aristocrat.
I'd give its moat something like:
6.5–7/10
rather than 9–10/10.
But there are several things working in its favour.
A. Installed base
Machines create future consumables demand.
B. Specialist knowledge
The products are technical rather than generic industrial goods.
C. Customer relationships
Mining companies and laboratories don't necessarily want to change analytical systems casually.
D. Cross-selling
XRF says customers are increasingly purchasing multiple products across its range.
E. Consumables
This is probably the most attractive part.
The consumables division generated $19.3m revenue and $7.2m PBT in FY25, giving a remarkable ~38% PBT margin.
That's the piece of the business I'd investigate most deeply.
7. Is XRF cyclical?
Yes.
And this is an important distinction from something like ResMed.
XRF has exposure to:
- mining
- exploration
- commodity prices
- laboratory capital expenditure
- lithium
- iron ore
- industrial activity
XRF itself noted that the mining industry was an important driver of activity, while falling lithium chemical prices affected consumables revenue and costs.
So I'd describe XRF as:
A high-quality niche industrial business with some mining-cycle exposure.
Not:
A completely predictable consumer/healthcare compounder.
8. Valuation — this is where the argument becomes interesting
At roughly $1.75–$1.80, XRF is trading around:
22–23× earnings
and approximately:
25–27× FCF
depending on the exact price and calculation methodology.
That's not cheap.
Historically, its P/E has expanded considerably: So the market has already recognised that XRF is a good business.
| FY | P/E |
|---|---|
| FY22 | 12.7× |
| FY23 | 20.9× |
| FY24 | 20.9× |
| FY25 | 24.9× |
| FY26 | 23.5× |
The really interesting Buffett question
At $1.75, you're essentially saying:
"I believe XRF can continue compounding earnings at a decent rate for many years."
That's possible.
But Buffett generally wants to pay a price that leaves room for being wrong.
I'd therefore distinguish:
Business quality
8/10
Balance sheet
9.5/10
Earnings quality
8/10
Moat
6.5–7/10
Current valuation
6/10
Overall Buffett fit
~8/10
But valuation prevents it being a screaming Buffett bargain.
What price would interest me?
I'd use earnings rather than trying to calculate an ultra-precise DCF for a small company.
FY2026 EPS is about 7.8 cents.
That gives approximately:
| XRF price | Approx. P/E | My interpretation |
|---|---|---|
| $2.00 | 25.6× | Expensive |
| $1.80 | 23.1× | Reasonable/expensive |
| $1.60 | 20.5× | Interesting |
| $1.40 | 17.9× | Very interesting |
| $1.25 | 16.0× | Strong margin of safety |
| $1.10 | 14.1× | Exceptional valuation if earnings remain intact |
XRF versus the Buffett watchlist
This is where I'd put it:
| Company | Moat | ROIC | Debt | Growth | Valuation |
|---|---|---|---|---|---|
| RMD | ★★★★★ | ★★★★★ | ★★★★★ | ★★★★½ | ★★★★ |
| ALL | ★★★★★ | ★★★★½ | ★★★★½ | ★★★★½ | ★★★★ |
| XRF | ★★★½ | ★★★★ | ★★★★★ | ★★★★ | ★★★ |
| MPL | ★★★½ | ★★★★★ | ★★★★★ | ★★★½ | ★★★★ |
| QBE | ★★★½ | ★★★★ | ★★★★ | ★★★★ | ★★★★★ |
| CPU | ★★★★½ | ★★★★★ | ★★★★ | ★★★★ | ★★★½ |
| REA | ★★★★★ | ★★★★★ | ★★★★★ | ★★★★★ | ★★½ |
More buffett analysis
- Consistent Profitability: XRF's ROE of 16.57% is supported by a robust 16.29% Net Profit Margin. This confirms that the return is driven by genuine pricing power and operational profitability, rather than financial engineering. [1, 2, 3]
- Low Debt Leverage: Buffett famously avoids companies that inflate their ROE by taking on dangerous levels of debt. XRF displays exemplary conservative debt management, maintaining an exceptionally low Debt-to-Equity ratio of 1.4%. This pristine balance sheet minimizes structural risk and guarantees that its ROE is entirely organic. [1, 2, 3, 4]
- Asset Efficiency: Its Return on Invested Capital (ROIC) of 17.79% and Return on Capital Employed (ROCE) of 21.98% significantly exceed its Weighted Average Cost of Capital (WACC) of 7.64%. This massive spread proves that management creates substantial shareholder value on every dollar deployed. [1]
| Buffett Benchmark | XRF Performance Profile | Strategic Evaluation |
|---|---|---|
| High Retained Return Threshold | ROIC (17.79%) vs WACC (7.64%) | Pass. Management easily surpasses the cost of capital hurdle, making internal business re-investment highly accretive. |
| Sustainable Dividend Payout | 61% Payout Ratio (Annual Dividend: $0.045) | Pass. A payout ratio under 70% rewards shareholders while leaving a ~40% capital cushion to fund organic growth and R&D. |
| Conservative Capital Structure | Debt-to-Equity: 1.4% | Pass. Aligns perfectly with Buffett's aversion to structural financial leverage. |
| Capital Efficiency (ROA) | 12.76% Return on Assets | Pass. Indicates highly efficient deployment of physical equipment and working capital. |
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