Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-11) + Yahoo Finance
Auditor: Deloitte & Touche LLP — Clean opinion (auditor since 1997)
One-line verdict: Amphenol earns a C grade with one fail — goodwill plus intangibles at $12.8B representing 96% of equity — and two watch items. Revenue surged 52% to $23.1B, driven by AI-related demand and the $2.1B Andrew acquisition from CommScope, but the acquisition-heavy growth strategy has loaded the balance sheet with intangible assets. Cash flow quality is strong: CFFO/NI at 1.26, M-Score at -2.40, and FCF of $4.4B. The C grade reflects acquisition-driven balance sheet concentration, not earnings quality problems. The key question is whether Amphenol can maintain its historically superior operating discipline across a business that nearly doubled in size.
| Metric | Result |
|---|---|
| Red Flags | **1** (goodwill+intangibles at 96% of equity) |
| Watch Items | **2** (cash vs debt, goodwill surge 35%) |
| Checks Completed | **17/18** |
| Beneish M-Score | **-2.40** (safe zone) |
| Auditor | Deloitte & Touche LLP — Unqualified opinion |
The Interconnect Empire
Amphenol is one of the world's largest manufacturers of electronic connectors, sensors, and interconnect systems, serving markets from AI data centers to military vehicles to automobiles.
From the 10-K: The company "aligns its businesses into three reportable business segments: (i) Communications Solutions, (ii) Harsh Environment Solutions and (iii) Interconnect and Sensor Systems." This structure "reinforces the Company's entrepreneurial culture and enables clear accountability of each of our business unit general managers."
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Revenue | $12.6B | $12.6B | $15.2B | $23.1B | +52% |
| Net Income | $1.9B | $1.9B | $2.4B | $4.3B | +76% |
| Gross Margin | 31.9% | 32.5% | 33.8% | 36.9% | +3.1pp |
| Net Margin | 15.1% | 15.4% | 15.9% | 18.5% | +2.6pp |
| Operating Margin | — | 20.4% | 20.7% | 25.4% | +4.7pp |
| ROE | 27.1% | 23.1% | 24.8% | 31.8% | Improving |
Revenue growth of 52% is extraordinary for an interconnect company. Net income grew even faster at 76%, and operating margin expanded from 20.7% to 25.4%. Gross margin improved 3.1 percentage points to 36.9% — a sign of pricing power and mix shift toward higher-margin products.
The Andrew Acquisition
From the 10-K: "On January 31, 2025, the Company completed the acquisition of the Outdoor Wireless Networks segment (OWN) and Distributed Antenna Systems (DAS) business (collectively, Andrew) from Vistance Networks, Inc. (Vistance, formerly known as CommScope Holding Company, Inc.)." Andrew provides "communications networks solutions, with advanced technologies in the area of base station antennas and related interconnect solutions, as well as distributed antenna systems."
This added significantly to revenue and goodwill. Total assets reached $36.2B, with $10.6B in goodwill and $2.2B in other intangible assets.
Cash Flow: Scaling with Revenue
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Operating Cash Flow | $2,529M | $2,815M | $5,375M |
| Free Cash Flow | $2,156M | $2,149M | $4,378M |
| CFFO / Net Income | 1.31 | 1.16 | 1.26 |
CFFO nearly doubled from $2.8B to $5.4B, tracking the revenue surge. CFFO/NI at 1.26 demonstrates that the earnings growth is cash-backed, not accounting-driven.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO | Pass | DSO 75 days, change -4 days YoY |
| A2 | AR vs Revenue | Pass | AR growth 43.5% vs revenue growth 51.7% |
| A3 | Revenue vs CFFO | Pass | Revenue +51.7%, CFFO +91.0%. Cash outpaces revenue |
All three revenue quality checks pass. DSO actually improved by 4 days despite the massive revenue increase, and CFFO grew nearly twice as fast as revenue — a very healthy pattern. AR growth of 43.5% was below revenue growth of 51.7%, indicating strong collection discipline.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory | Pass | Inventory +34.5% vs COGS +44.6%. Normal |
| B2 | CapEx | Pass | CapEx growth 49.8% vs revenue 51.7%. Normal |
| B3 | SG&A Ratio | Pass | SG&A/Gross Profit = 29.9%. Excellent |
| B4 | Gross Margin | Pass | Gross margin 36.9%, +3.1pp. Improving |
All expense quality checks pass. The gross margin expansion of 3.1pp to 36.9% is notable and reflects Amphenol's mix shift toward higher-value products and strong pricing power in AI-related interconnects. SG&A at 29.9% of gross profit is excellent efficiency.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs NI | Pass | CFFO/NI = 1.26. Profits backed by cash |
| C2 | FCF | Pass | FCF $4.4B, FCF/NI = 1.03 |
| C3 | Accruals | Pass | Accruals ratio = -3.0%. Low |
| C4 | Cash vs Debt | Watch | Cash $11.4B covers 74% of debt $15.5B |
C4: Cash of $11.4B covers 74% of total debt of $15.5B. Debt more than doubled from $6.9B to $15.5B, primarily to finance the Andrew acquisition. However, Debt/EBITDA at 2.2x is healthy, and interest coverage at 16.2x is comfortable. From the 10-K, the company "monitors its mix of fixed-rate and variable-rate debt" and notes that "3% of the Company's outstanding borrowings were subject to floating interest rates" — minimal rate risk.
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | Fail | $12.8B = 96% of equity |
| D2 | Leverage | Pass | Debt/EBITDA = 2.2x. Healthy |
| D3 | Soft Asset Growth | Pass | Other assets 45.8% vs revenue 51.7%. Normal |
| D4 | Impairment | N/A | No write-off data |
D1: Goodwill of $10.6B and intangibles of $2.2B total $12.8B, representing 96% of equity. From the 10-K: "On December 31, 2025, the total assets of the Company were $36.2 billion, which included $10.6 billion of goodwill (the excess of fair value of consideration paid over the fair value of net identifiable assets of businesses acquired) and $2.2 billion of other intangible assets, net." The Andrew acquisition alone added billions to goodwill. The company "performs annual evaluations (or more frequently, if necessary) for the potential impairment of goodwill," but so far no impairment has been recorded. The risk is that goodwill at near-100% of equity leaves no margin for error if any acquisition underperforms.
M&A Risk
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Post-Acquisition FCF | Pass | FCF after acquisitions positive |
| E2 | Goodwill Surge | Watch | Goodwill+Intangibles surged 35% YoY |
E2: Goodwill plus intangibles surged 35% year-over-year due to the Andrew acquisition. While Amphenol has a strong track record of integrating acquisitions and maintaining operating discipline, this pace of balance sheet expansion requires monitoring.
Beneish M-Score
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | M-Score | Pass | -2.40 (< -2.22). Safe zone |
The M-Score at -2.40 passes comfortably. The SGI (Sales Growth Index) at 1.517 is elevated, reflecting the 52% revenue surge, but this is a genuine growth driver not a manipulation signal. AQI at 0.805 is favorable, indicating asset quality improved.
Key Risks from Item 1A
1. Andrew integration execution. Integrating a major antenna and DAS business from CommScope into Amphenol's decentralized operating model is a multi-year effort with significant execution risk.
2. Customer concentration across end markets. Amphenol serves AI data centers, military, automotive, and telecom — each subject to different cyclical patterns. An AI capex slowdown would disproportionately impact the Communications Solutions segment.
3. Acquisition-dependent growth model. From the 10-K: The company acknowledges it "may in the future incur goodwill and other intangible asset impairment charges." With goodwill at 96% of equity, even a modest impairment would materially affect book value.
Altman Z-Score and F-Score
| Model | Score | Interpretation |
|---|---|---|
| Altman Z-Score | **5.05** | Safe zone. Strong financial health |
| F-Score (Dechow) | **1.10** | Low fraud probability (0.41%) |
Both models are reassuring. Z-Score at 5.05 reflects strong profitability and manageable leverage despite the acquisition debt. F-Score probability of 0.41% is very low.
Summary
| # | Check | Result |
|---|---|---|
| A1-A3 | Revenue Quality | Pass-Pass-Pass |
| B1-B4 | Expense Quality | Pass-Pass-Pass-Pass |
| C1-C4 | Cash Flow Quality | Pass-Pass-Pass-Watch |
| D1-D4 | Balance Sheet | Fail-Pass-Pass-N/A |
| E1-E2 | M&A Risk | Pass-Watch |
| F1 | Beneish M-Score | Pass |
Grade: C. Acquisition-loaded balance sheet is the primary concern; operating and cash flow quality are excellent.
Amphenol's FY2025 is a story of explosive growth with acquisition-driven balance sheet risk:
The C grade is solely due to the acquisition-heavy balance sheet. If Amphenol successfully integrates Andrew and maintains operating discipline, the grade would improve as earnings delever the balance sheet. The key monitoring items: (1) goodwill impairment tests on Andrew, (2) pace of debt reduction, and (3) whether the 36.9% gross margin is sustainable.
**Disclaimer**: This report is based on Amphenol's FY2025 10-K (SEC EDGAR) and public financial data. This is NOT investment advice.
Data: SEC EDGAR 10-K (Filed 2026-02-11) + Yahoo Finance
Auditor: Deloitte & Touche LLP (Unqualified opinion, auditor since 1997)