Agilent Technologies

Agilent sells an expensive machine once, then sells the chemicals, parts, and service contracts that machine needs for the rest of its life. That recurring side of the business brought in 759 million dollars last quarter and earns a 32 percent operating margin, the fattest in the company. Once a lab installs an Agilent instrument, it keeps paying Agilent for years.

Revenue grew 10 percent last quarter to 1.83 billion dollars, and profit margins expanded instead of shrinking. The company keeps about 19.6 cents of profit on every dollar of sales, and management raised its full-year outlook for revenue, margins, and earnings all at the same time. Companies rarely raise all three at once.

This is not a fast grower. Revenue climbed just 6.7 percent over the past year, and once you strip out currency swings and acquisitions the underlying growth is closer to 5 percent. The stock has badly trailed the market over the last five years, compounding at only about 4.3 percent a year.

China is a major market and it has been shaky, with revenue there falling 4 percent in one recent quarter as government lab orders got delayed. Tariffs have squeezed gross margins by more than 100 basis points, and management admits that reshaping the supply chain will take years, not months.