What happened

Shares of chemical reagents producer Avantor (AVTR 0.04%) are slumping today, down by 10.4% as of 2 p.m. ET, after the company posted a bit of a miss in its Q2 earnings report last night.

Expected to earn $0.38 per share on sales of $2 billion, Avantor instead reported a profit of $0.37 per share and sales closer to $1.9 billion.  

So what

And that's the good news.

The bad news is that the $0.37 per share that Avantor earned in its fiscal second quarter 2022 was only a pro forma number. When calculated according to generally accepted accounting principles (GAAP), Avantor's profit for the period was only $0.28 per share.

That being said, EPS of $0.28 was still 17% better than the profit Avantor earned a year ago -- not bad considering that sales only grew 3% year over year. Management also pointed out that it generated $191.2 million in positive free cash flow, which was more than the $187.4 million it reported as net income.

Now what

Management characterized its results as "strong" and predicted that Avantor's core business will continue to enjoy "momentum" as the year moves into its second half. Not all investors are so optimistic, however.

Analyst estimates, for example, are calling for pro forma profits to continue in the $0.37 to $0.38 range over the next couple of quarters, showing essentially no sequential growth, and only about 6% growth year over year. Avantor didn't say what it expects its GAAP earnings to be, but analysts are forecasting the company to earn about $1.09 per share through the end of this year, giving the stock a P/E ratio of about 26.5 based on those expected current-year earnings.

For a company that increased profits 17% last quarter, that valuation seems like a stretch. For a company whose growth will likely slow to around 6% later this year, it looks even more overpriced.