The FTSE 250‘s Renishaw (LSE: RSW) has been on my radar for ages.

It’s a UK-based supplier of manufacturing technologies, analytical instruments, and medical devices. The business ticks quite a few of my boxes for quality.

For example, the operating margin is running at a meaty-looking 15.7% or so, and the return on capital employed a respectable 11.4%.

On top of that, the business has a nice chunk of net cash on the balance sheet, rather than net debt. There’s also a robust multi-year record of consistent cash flow.

I reckon all those indicators combine to suggest an enterprise with some technical advantages and a good hold on its niche in the market.

Better value now?

But… one thing that has put me off the stock for a long time has been valuation. The positive attributes I mentioned have been noticed by the market and the valuation has always been well up with events.

However, the situation has changed a bit over the past few years. Renishaw hasn’t been immune to all the general economic and geopolitical challenges we’ve all faced. They’ve contributed to a patchy record for earnings.

The stock market has been swift to punish the stock, and it’s down almost 50% since the spring of 2021.

As uncomfortable as the situation may be for existing shareholders, it does raise the possibility that the valuation might have eased a bit — and I think it has.

Today’s (24 October) share price near 3,271p puts the forward-looking price-to-earnings (P/E) ratio at about 18 for the trading year to June 2026.

I admit that’s still not bargain-basement stuff. But it’s worth noting City analysts have pencilled in quite robust increases for earnings. They expect 15%-16% advances for this trading year and the next to 2026.

I’d do more research now

At first glance, it looks like Renishaw may have returned to its old form and earnings declines are in the rear-view mirror — at least for the time being.

I’m encouraged further by the trading statement released today. There was a decline in profits in the firm’s analytical instruments and medical devices division. But overall adjusted profit before tax rose by 22% in the three months to 30 September, when measured year on year.

Looking ahead, the company expects to meet prior expectations for the full trading year to June 2025. But the directors expressed a note of caution too. They are wary about demand for encoder products from the semiconductor manufacturing sector for the rest of the year.

That’s one of the risks here — the Renishaw business is vulnerable to the economic ups and downs of the sectors it serves. No amount of well-defended market share will save it from that challenge. If an industry Renishaw serves turns down, the company’s earnings and stock price will likely follow causing shareholders to lose money.

Nevertheless, I see the stock opportunity here today as far more attractive than it was when the valuation was higher. So I’d be inclined to dig in with further research and consideration now.