There’s an old saying that in a gold rush, those who make the money are the ones selling the shovels; and mining service companies have indeed proven to be shrewd investments historically. XRF Scientific holds a strong niche in sample preparation equipment and consumables used in X-ray fluorescence (XRF) and X-ray diffraction (XRD) analysis, which are essential in determining the quality and purity of materials. As such, XRF may be one such company—one with a strong reputation, particularly in the Australian sector.
Assaying ore bodies is a critical step not only in assessing the economic viability of mining operations but also in negotiating sale contracts between miners and customers. It's also a regulatory requirement for reporting exploration results to the stock market. Beyond mining, XRF equipment is used across industries where knowing the purity of materials is essential.
XRF Scientific is a moderately sized company (market cap approximately AU$290 million) with a global footprint. It has more than 10,000 machines installed across over 70 countries. A significant part of its strength lies in its recurring revenue from consumables—particularly platinum crucibles and fluxes—which offer high margins, a defensible niche, and reliable cash flow.
Recent acquisitions, including Orbis Mining and Labfit, have expanded its capabilities into automated sample preparation. These moves suggest the company is not content to rest on its laurels and is actively investing in sustainable growth within its area of competence.
That said, XRF Scientific does face risks. It operates in the shadow of much larger and better-resourced competitors such as Thermo Fisher Scientific, Bruker, Malvern Panalytical, and Rigaku. The company has responded by focusing on a supporting role—enabling better analysis through high-quality sample preparation equipment and consumables.
While still a small player globally XRF may lack the R&D firepower of its multinational peers and will need to work hard to defend and deepen its niche.
Encouragingly, XRF appears to be in a strong financial position. It is a low-debt company, with an interest coverage ratio of nearly 47 times and a current ratio of 3.75. Earnings have grown at an impressive average rate of around 28% per year over the past five years. Board alignment is also notable, with the four directors owning nearly 8% of the company—an indicator of internal confidence in its future. The market seems to share this confidence, with a current PE ratio of around 26 times.
In short, XRF Scientific appears to understand its strengths and weaknesses and is positioning itself as a long-term player in mining laboratory support services. It may be of interest to value investors with a long-term outlook.
How well do narratives help inform your perspective?
Disclaimer
The user Robbo holds no position in ASX:XRF. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.