XRF Scientific's Order Timing Keeps Getting Mistaken For Weak Demand

Fund managers say a consistent compounder with a printer-and-ink revenue model remains undervalued and under the radar

30 Jun 2026 · 6 min read

Naos Asset Management's June 2026 quarterly report described XRF Scientific delivering a strong quarter on both operational and strategic fronts. In April 2026 the company announced the acquisition of Bruker Corporation's Combustion Gas Analysis business for US$4.0 million upfront plus an earn-out of up to US$1.0 million, a deal the manager called strategically logical and financially low risk given Bruker's established install base and stable annuity-style consumables revenue, with manufacturing to be relocated from Germany to Perth to improve gross margins. Third-quarter revenue rose 13.8 per cent year on year to A$15.8 million, extending a run of profit growth across more than ten consecutive reporting halves.

From FY20 to FY25, revenue grew from ~A$29 million to ~A$59 million (15.3% CAGR) and EBITDA from ~A$5 million to ~A$15.6 million (25.6% CAGR), with margins expanding from ~17% to ~26%, delivered without a single material equity raising.

— Naos Asset Management, Quarterly Report, June 2026

A printer-and-ink model that keeps getting misread

Seneca Financial Solutions has repeatedly made the case that XRF's quarterly volatility reflects order timing rather than any change in demand. The manager described a business selling mining and industrial sample testing equipment and consumables, comparing the recurring revenue dynamic to a classic printer-and-ink model: XRF sells the testing machine, then generates ongoing revenue from the consumable chemicals required to run it. It said several large offshore customers place bulk orders every 12 to 18 months to reduce customs and logistics costs, creating uneven revenue patterns between reporting periods that can spook investors who focus too closely on any single half.

It's done 26% compound annual growth in profit over the last 5 years. Yet only trades on a 20 times PE. So, it's at valuation lows despite the business going continuing to go pretty well... We think that's only a matter of time for that eventually sort of re-rates.

— Seneca Financial Solutions, Presentation, May 2026

A weak half that turned out to be exactly that

Naos Asset Management's March 2026 update showed exactly this dynamic playing out. XRF delivered profit growth of only around 4 per cent in the first half of FY26, roughly 6 per cent below the sole covering broker's forecast, driven by the inherent lumpiness of orders from global distribution partners who hold meaningful inventory and place fewer, larger orders. The manager said it remained confident XRF could grow NPAT around 10 per cent annually over the medium term through a growing product suite, internally funded M&A and deeper client penetration, and continued adding to its position at what it considered an attractive forward price-to-earnings multiple of less than 21 times.

A long-term holder trimming into multiple expansion

Mereweather Capital took profits in the stock as early as September 2025, explaining that XRF was one of several holdings bought years earlier when it traded on low double-digit earnings multiples with no sell-side coverage, and that as execution drew in more institutional attention and higher valuations, it had become prudent to reduce position sizes and rotate capital into ideas starting from where XRF once did, even while retaining a positive view on the company's outlook.

What managers are watching next

With a planned direct sales presence in India from early 2026 and the newly acquired Combustion Gas Analysis business set to relocate manufacturing to Perth, the key questions for managers are whether XRF can sustain its roughly 10 per cent medium-term NPAT growth target through its three stated growth engines of customer penetration, geographic expansion and bolt-on acquisitions, and whether the market eventually stops treating routine distributor order timing as a signal of deteriorating demand.