Bristol-Myers Squibb (BMY) Valuation

Flash Player 9 or higher is required to view the chart Click here to download Flash Player now

Company Profile (obtained from Google Finance): Bristol-Myers Squibb Company (BMS) is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceutical and nutritional products. The Company had two segments: Pharmaceuticals and Nutritionals. The Pharmaceuticals segment is made up of the global pharmaceutical and international consumer medicines business. The Nutritionals segment consists of Mead Johnson Nutritionals (Mead Johnson), primarily an infant formula and children’s nutritionals business. In June 2008, BMS acquired Kosan Biosciences, Inc., a developer of oncology products. In August 2008, the Company completed the divestiture of its ConvaTec business to Cidron Healthcare Limited, an affiliate of Nordic Capital Fund VII and Avista. In December 2008, BMS completed the sale of its brand business in Egypt to GlaxoSmithKline. In July 2009, the Company’s branded generics business, which comprises a portfolio of 13 branded pharmaceuticals was acquired by GlaxoSmithKline plc.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 5/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    11/23/2009
• MG Value    $12
• MG Opinion    Overvalued
• Value Based on 3% Growth    $19
• Value Based on 0% Growth    $11
• Market Implied Growth Rate    5.04%
• Net Current Asset Value (NCAV)    -$1.54
• PEmg    18.59
• Current Ratio    1.81
• PB Ratio    3.41

Key Data:

Balance Sheet – 9/30/2009

• Current Assets    $13,387,000,000
• Current Liabilities    $7,392,000,000
• Total Debt    $6,307,000,000
• Total Assets    $30,951,000,000
• Intangible Assets    $2,726,000,000
• Goodwill    $5,475,000,000
• Total Liabilities    $16,433,000,000
• Outstanding Shares    1,980,980,000

Earnings Per Share – Diluted

• 2009 (estimate)    $1.70
• 2008    $1.58
• 2007    $0.88
• 2006    $0.62
• 2005    $1.44
• 2004    $1.21
• 2003    $1.59
• 2002    $1.06
• 2001    $0.95
• 2000    $1.92
• 1999    $1.69

Earnings Per Share – Modern Graham

• 2009 (estimate)    $1.34
• 2008    $1.16
• 2007    $1.01
• 2006    $1.12
• 2005    $1.33
• 2004    $1.29

Valuation History:

• 11/23/09 – Value $12, Actual Price $24.96, Overvalued & Enterprising
• 8/28/09 – Value $12, Actual Price $22.37, Overvalued & Enterprising