Baxter International Inc Valuation – March 2019 $BAX

Company Profile (excerpt from Reuters): Baxter International Inc., incorporated on October 19, 1931, through its subsidiaries, provides a portfolio of essential renal and hospital products, including acute and chronic dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; premixed and oncolytic injectables; biosurgery products and anesthetics; drug reconstitution systems, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. The Company’s products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices and by patients at home under physician supervision. As of December 31, 2016, the Company manufactured products in over 20 countries and sold them in over 100 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,937,512,485 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.09 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -29.57% Fail
6. Moderate PEmg Ratio PEmg < 20 22.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.25 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.40
MG Growth Estimate 0.23%
MG Value $30.48
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $49.33
MG Value based on 0% Growth $28.92
Market Implied Growth Rate 6.92%
Current Price $75.97
% of Intrinsic Value 249.24%

Baxter International Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.35 in 2015 to an estimated $3.4 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.92% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Baxter International Inc revealed the company was trading above its Graham Number of $31.96. The company pays a dividend of $0.73 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 22.33, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.53.

Baxter International Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.53
Graham Number $31.96
PEmg 22.33
Current Ratio 2.09
PB Ratio 5.25
Current Dividend $0.73
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $5,919,000,000
Total Current Liabilities $2,836,000,000
Long-Term Debt $3,473,000,000
Total Assets $15,641,000,000
Intangible Assets $4,356,000,000
Total Liabilities $7,825,000,000
Shares Outstanding (Diluted Average) 540,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.10
Dec2018 $2.97
Dec2017 $1.29
Dec2016 $9.01
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.40
Dec2018 $3.67
Dec2017 $4.04
Dec2016 $5.15
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42

Recommended Reading:

Other ModernGraham posts about the company

Baxter International Inc Valuation – May 2018 $BAX
10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017

Other ModernGraham posts about related companies

Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Inc Valuation – May 2018 $BAX

Company Profile (excerpt from Reuters): Baxter International Inc., incorporated on October 19, 1931, through its subsidiaries, provides a portfolio of essential renal and hospital products, including acute and chronic dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; premixed and oncolytic injectables; biosurgery products and anesthetics; drug reconstitution systems, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. The Company’s products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices and by patients at home under physician supervision. As of December 31, 2016, the Company manufactured products in over 20 countries and sold them in over 100 countries.

BAX Chart

BAX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $37,753,169,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.57 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 32.05% Fail
6. Moderate PEmg Ratio PEmg < 20 19.30 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.24 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.57 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.59
MG Growth Estimate -1.56%
MG Value $19.31
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $52.07
MG Value based on 0% Growth $30.53
Market Implied Growth Rate 5.40%
Current Price $69.32
% of Intrinsic Value 358.99%

Baxter International Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PB ratio. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.01 in 2014 to an estimated $3.59 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.4% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Baxter International Inc revealed the company was trading above its Graham Number of $32.11. The company pays a dividend of $0.61 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 19.3, which was below the industry average of 42.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.3.

Baxter International Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.30
Graham Number $32.11
PEmg 19.30
Current Ratio 2.57
PB Ratio 4.24
Current Dividend $0.61
Dividend Yield 0.88%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $7,263,000,000
Total Current Liabilities $2,821,000,000
Long-Term Debt $3,509,000,000
Total Assets $17,111,000,000
Intangible Assets $4,473,000,000
Total Liabilities $7,987,000,000
Shares Outstanding (Diluted Average) 558,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.72
Dec2017 $1.29
Dec2016 $9.01
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35
Dec1998 $0.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.59
Dec2017 $4.04
Dec2016 $5.15
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42
Dec2002 $1.31

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – August 2017
10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017
10 Low PE Stock Picks for the Defensive Investor – January 2017

Other ModernGraham posts about related companies

Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Inc Valuation – January 2017 $BAX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Baxter International Inc (BAX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Baxter International Inc., through its subsidiaries, provides a portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. Its Hospital Products business manufactures IV solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps, inhalation anesthetics, and biosurgery products. The business also provides products and services related to pharmacy compounding, and drug formulation. The Renal business provides products and services to treat end-stage renal disease, or irreversible kidney failure and acute kidney injuries.

BAX Chart

BAX data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,557,798,383 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.53 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 64.10% Pass
6. Moderate PEmg Ratio PEmg < 20 9.12 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.99 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.16
MG Growth Estimate 6.53%
MG Value $111.31
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $74.84
MG Value based on 0% Growth $43.87
Market Implied Growth Rate 0.31%
Current Price $47.08
% of Intrinsic Value 42.29%

Baxter International Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.6 in 2012 to an estimated $5.16 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Baxter International Inc revealed the company was trading below its Graham Number of $56.96. The company pays a dividend of $0.49 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 9.12, which was below the industry average of 32.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.96.

Baxter International Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.96
Graham Number $56.96
PEmg 9.12
Current Ratio 2.53
PB Ratio 2.99
Current Dividend $0.49
Dividend Yield 1.04%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $6,589,000,000
Total Current Liabilities $2,606,000,000
Long-Term Debt $0
Total Assets $15,795,000,000
Intangible Assets $3,859,000,000
Total Liabilities $7,118,000,000
Shares Outstanding (Diluted Average) 551,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.04
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35
Dec1998 $0.55
Dec1997 $0.53
Dec1996 $1.23

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.16
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42
Dec2002 $1.31
Dec2001 $1.07
Dec2000 $1.04

Recommended Reading:

Other ModernGraham posts about the company

Baxter International Inc Valuation – February 2016 $BAX
The Best Companies of the Medical Industry – September 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Baxter International Inc. Analysis – September 2015 Update $BAX
Baxter International Analysis – June 2015 Update $BAX

Other ModernGraham posts about related companies

Centene Corp Valuation – Initial Coverage $CNC
Invacare Corporation Valuation – Initial Coverage $IVC
Becton Dickinson and Co Valuation – January 2017 $BDX
Select Medical Holdings Corp Valuation – Initial Coverage $SEM
Chemed Corporation Valuation – Initial Coverage $CHE
Inogen Inc Valuation – Initial Coverage $INGN
Surgical Care Affiliates Inc Valuation – Initial Coverage $SCAI
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Illumina Inc Valuation – Initial Coverage $ILMN
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Inc Valuation – August 2016 $BAX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Baxter International Inc (BAX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Baxter International Inc., through its subsidiaries, provides a portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. Its Hospital Products business manufactures IV solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps, inhalation anesthetics, and biosurgery products. The business also provides products and services related to pharmacy compounding, and drug formulation. The Renal business provides products and services to treat end-stage renal disease, or irreversible kidney failure and acute kidney injuries.

BAX Chart

BAX data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,134,525,523 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.83 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 65.81% Pass
6. Moderate PEmg Ratio PEmg < 20 9.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.13 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BAX value chart August 2016

EPSmg $5.21
MG Growth Estimate 6.76%
MG Value $114.79
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $75.61
MG Value based on 0% Growth $44.32
Market Implied Growth Rate 0.37%
Current Price $48.23
% of Intrinsic Value 42.02%

Baxter International Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.6 in 2012 to an estimated $5.21 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Baxter International Inc revealed the company was trading below its Graham Number of $56.99. The company pays a dividend of $0.48 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 9.25, which was below the industry average of 40.07, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.18.

Baxter International Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

BAX charts August 2016

Net Current Asset Value (NCAV) -$1.18
Graham Number $56.99
PEmg 9.25
Current Ratio 1.83
PB Ratio 3.14
Current Dividend $0.48
Dividend Yield 0.98%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $6,823,000,000
Total Current Liabilities $3,723,000,000
Long-Term Debt $0
Total Assets $15,982,000,000
Intangible Assets $3,912,000,000
Total Liabilities $7,473,000,000
Shares Outstanding (Diluted Average) 553,000,000

Earnings Per Share History

Next Fiscal Year Estimate $9.20
Dec2015 $1.76
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35
Dec1998 $0.55
Dec1997 $0.53
Dec1996 $1.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.21
Dec2015 $3.35
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42
Dec2002 $1.31
Dec2001 $1.07
Dec2000 $1.04

Recommended Reading:

Other ModernGraham posts about the company

Baxter International Inc Valuation – February 2016 $BAX
The Best Companies of the Medical Industry – September 2015
15 Best Stocks For Value Investors This Week – 9/12/15
Baxter International Inc. Analysis – September 2015 Update $BAX
The Best Companies of the Medical Industry – September 2015

Other ModernGraham posts about related companies

Cerner Corporation Valuation – August 2016 $CERN
Stryker Corporation Valuation – August 2016 $SYK
Henry Schein Inc Valuation – July 2016 $HSIC
Quest Diagnostics Inc Valuation – July 2016 $DGX
Tenet Healthcare Corp Valuation – July 2016 $THC
Laboratory Corp of America Holdings Valuation – July 2016 $LH
Medtronic PLC Valuation – July 2016 $MDT
Intuitive Surgical Inc Valuation – July 2016 $ISRG
Cardinal Health Inc Valuation – July 2016 $CAH
PerkinElmer Inc Valuation – July 2016 $PKI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Inc Valuation – February 2016 $BAX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Baxter International Inc (BAX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Baxter International Inc. (Baxter) is a diversified healthcare company. The Company operates in two segments: BioScience segment, which include three commercial franchises: Hemophilia, BioTherapeutics and BioSurgery, and Medical Products segment, which include four commercial franchises: Fluid Systems, Renal, Specialty Pharmaceuticals and BioPharma Solutions. Its BioScience processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions, and biosurgery products. Its Medical Products manufactures intravenous (IV) solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps and inhalation anesthetics. Its products are used in hospitals, kidney dialysis centers and nursing homes, among others.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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ModernGraham Valuation of BAX

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,289,225,443 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 24.96% Fail
6. Moderate PEmg Ratio PEmg < 20 10.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.74 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BAX value chart February 2016

EPSmg $3.31
MG Growth Estimate 0.33%
MG Value $30.34
Opinion Overvalued
MG Value based on 3% Growth $48.06
MG Value based on 0% Growth $28.17
Market Implied Growth Rate 1.18%
Current Price $36.01
% of Intrinsic Value 118.68%

Baxter International Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $3.31 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 1.18% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Stage 3: Information for Further Research

BAX charts February 2016

Net Current Asset Value (NCAV) -$2.20
Graham Number $23.06
PEmg 10.86
Current Ratio 1.86
PB Ratio 2.53
Dividend Yield 4.65%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $11,138,000,000
Total Current Liabilities $5,981,000,000
Long-Term Debt $3,791,000,000
Total Assets $20,172,000,000
Intangible Assets $4,128,000,000
Total Liabilities $12,348,000,000
Shares Outstanding (Diluted Average) 549,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.65
Dec2014 $4.56
Dec2013 $3.66
Dec2012 $4.18
Dec2011 $3.88
Dec2010 $2.39
Dec2009 $3.59
Dec2008 $3.16
Dec2007 $2.61
Dec2006 $2.13
Dec2005 $1.52
Dec2004 $0.63
Dec2003 $1.50
Dec2002 $1.66
Dec2001 $1.09
Dec2000 $1.25
Dec1999 $1.35
Dec1998 $0.55
Dec1997 $0.53
Dec1996 $1.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.31
Dec2014 $4.01
Dec2013 $3.67
Dec2012 $3.60
Dec2011 $3.24
Dec2010 $2.88
Dec2009 $2.95
Dec2008 $2.42
Dec2007 $1.93
Dec2006 $1.55
Dec2005 $1.27
Dec2004 $1.17
Dec2003 $1.42
Dec2002 $1.31
Dec2001 $1.07
Dec2000 $1.04
Dec1999 $0.87

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Medical Industry – September 2015
Baxter International Analysis – June 2015 Update $BAX
18 Companies in the Spotlight This Week – 3/15/15
Baxter International Inc. Quarterly Valuation – March 2015 $BAX
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

Cerner Corporation Valuation – February 2016 Update $CERN
Henry Schein Inc Valuation – February 2016 Update $HSIC
Medtronic PLC Valuation – January 2016 Update $MDT
PerkinElmer Inc Valuation – January 2016 Update $PKI
Quest Diagnostics Inc Valuation – January 2016 Update $DGX
Dentsply International Inc Valuation – November 2015 Update $XRAY
UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
Align Technology Inc. Valuation – November 2015 Update $ALGN
Varian Medical Systems Inc. Valuation – November 2015 Update $VAR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Inc. Analysis – September 2015 Update $BAX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Baxter International Inc. (BAX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Baxter International Inc. (Baxter) is a diversified healthcare company. The Company operates in two segments: BioScience segment, which include three commercial franchises: Hemophilia, BioTherapeutics and BioSurgery, and Medical Products segment, which include four commercial franchises: Fluid Systems, Renal, Specialty Pharmaceuticals and BioPharma Solutions. Its BioScience processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions, and biosurgery products. Its Medical Products manufactures intravenous (IV) solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps and inhalation anesthetics. Its products are used in hospitals, kidney dialysis centers and nursing homes, among others.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of BAX – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,658,480,312 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.30 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 28.73% Fail
6. Moderate PEmg Ratio PEmg < 20 10.55 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.47 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.30 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.47 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BAX value Chart September 2015

EPSmg $3.41
MG Growth Estimate 0.79%
MG Value $34.39
Opinion Fairly Valued
MG Value based on 3% Growth $49.50
MG Value based on 0% Growth $29.02
Market Implied Growth Rate 1.02%
Current Price $36.01
% of Intrinsic Value 104.72%

Baxter International qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the insufficient earnings growth over the last ten years, while the Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $3.41 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 1.02% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Baxter International (BAX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

BAX Charts September 2015

Net Current Asset Value (NCAV) -$13.72
Graham Number $25.38
PEmg 10.55
Current Ratio 2.30
PB Ratio 2.47
Dividend Yield 5.78%
Number of Consecutive Years of Dividend Growth 9

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $14,497,000,000
Total Current Liabilities $6,312,000,000
Long-Term Debt $12,054,000,000
Total Assets $30,015,000,000
Intangible Assets $5,876,000,000
Total Liabilities $22,027,000,000
Shares Outstanding (Diluted Average) 549,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.95
Dec14 $4.56
Dec13 $3.66
Dec12 $4.18
Dec11 $3.88
Dec10 $2.39
Dec09 $3.59
Dec08 $3.16
Dec07 $2.61
Dec06 $2.13
Dec05 $1.52
Dec04 $0.63
Dec03 $1.45
Dec02 $1.26
Dec01 $1.00
Dec00 $1.24
Dec99 $1.35
Dec98 $0.55
Dec97 $0.53
Dec96 $1.23
Dec95 $1.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.41
Dec14 $4.01
Dec13 $3.67
Dec12 $3.60
Dec11 $3.24
Dec10 $2.88
Dec09 $2.95
Dec08 $2.42
Dec07 $1.92
Dec06 $1.52
Dec05 $1.20
Dec04 $1.06
Dec03 $1.27
Dec02 $1.15
Dec01 $1.04
Dec00 $1.04
Dec99 $0.94

Recommended Reading:

Other ModernGraham posts about the company

Baxter International Analysis – June 2015 Update $BAX
18 Companies in the Spotlight This Week – 3/15/15
Baxter International Inc. Quarterly Valuation – March 2015 $BAX
22 Companies in the Spotlight This Week – 11/29/14
Baxter Corporation Quarterly Valuation – November 2014 $BAX

Other ModernGraham posts about related companies

Cerner Corporation Analysis – September 2015 Update $CERN
Boston Scientific Inc. Analysis – September 2015 Update $BSX
Intuitive Surgical Inc. Analysis – September 2015 Update $ISRG
Dentsply International Inc. Analysis – August 2015 Update $XRAY
Becton Dickinson & Company Analysis – August 2015 Update $BDX
Align Technology Analysis – Initial Coverage $ALGN
Varian Medical Systems Inc Analysis – August 2015 Update $VAR
Psychemedics Corporation Analysis – August 2015 Update $PMD
C.R. Bard Inc. Analysis – August 2015 Update $BCR
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Baxter International Analysis – June 2015 Update $BAX

500px-Baxter.svgA lot of investors and analysts considering Baxter International (BAX) may be focused primarily on qualitative speculation about the company’s prospects. For example, Seeking Alpha contributor Eric Landis recently speculated that the dividend may be cut based on management’s guidance. Such a qualitative analysis is important before making an investment decision, but it is critical when analyzing Baxter to consider the company’s intrinsic value in relation to its price.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether a company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

BAX Chart

BAX data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 5/7

  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 the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) 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 or be suitable for a Defensive Investor: Score = 4/5

  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 – FAIL
  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 that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $64.37
MG Value $53.51
MG Opinion Overvalued
Value Based on 3% Growth $55.59
Value Based on 0% Growth $32.59
Market Implied Growth Rate 4.14%
Net Current Asset Value (NCAV) -$14.36
PEmg 16.79
Current Ratio 1.60
PB Ratio 4.86

Balance Sheet – March 2015

Current Assets $9,734,000,000
Current Liabilities $6,074,000,000
Total Debt $7,680,000,000
Total Assets $24,861,000,000
Intangible Assets $5,762,000,000
Total Liabilities $17,603,000,000
Outstanding Shares 548,000,000

Earnings Per Share

2015 (estimate) $3.21
2014 $4.56
2013 $3.66
2012 $4.18
2011 $3.88
2010 $2.39
2009 $3.59
2008 $3.16
2007 $2.61
2006 $2.13
2005 $1.52

Earnings Per Share – ModernGraham

2015 (estimate) $3.83
2014 $4.01
2013 $3.67
2012 $3.60
2011 $3.24
2010 $2.88

Dividend History

BAX Dividend Chart

BAX Dividend data by YCharts

Conclusion

Baxter International passes the initial requirements of the Enterprising Investor but not of the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PB ratio. The Enterprising Investor is only concerned by the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $3.24 in 2011 to an estimated $3.83 for 2015. This level of earnings growth does not support the market’s implied estimate for 4.14% annual growth over the next 7-10 years.

The recent earnings growth has averaged around 3.64% per year, so the market is implying there will be a rise in earnings growth. However, the ModernGraham valuation model uses a much more conservative growth estimate and returns an estimate of intrinsic value falling below the market’s price, indicating that Baxter is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Baxter International Inc. Quarterly Valuation – March 2015 $BAX

500px-Baxter.svg

Baxter International Inc. should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PB ratio. The Enterprising Investor is only concerned by the level of debt relative to the net current assets. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.88 in 2010 to $4.01 for 2014. This is a strong level of demonstrated growth, which is in line with the market’s implied estimate for earnings growth of 4.19% over the next 7-10 years. The ModernGraham valuation model, therefore, returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

Be sure to check out previous ModernGraham valuations of Baxter International Inc. (BAX) for a greater perspective!

Read the full valuation on Seeking Alpha!

BAX Chart

BAX data by YCharts

Disclaimer: The author did not hold a position in Baxter International Inc. (BAX) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Baxter Corporation Quarterly Valuation – November 2014 $BAX

500px-Baxter.svg

After reviewing the data, Baxter should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the low current ratio as well as the high PB ratio, while the Enterprising Investor’s only issue with the company is the high level of debt relative to the net current assets. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.88 in 2010 to an estimated $4.11 for 2014. This is a fairly strong level of demonstrated growth which is in line with the market’s implied estimate for earnings growth of 4.55% over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

Be sure to check out previous ModernGraham valuations of Baxter Corporation for better perspective!

Read the full valuation on Seeking Alpha!

BAX Chart

BAX data by YCharts

Disclaimer:  The author did not hold a position in Cerner Corporation (CERN) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Baxter International Inc. Quarterly Valuation – August 2014 $BAX

500px-Baxter.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Baxter International (BAX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Baxter International Inc. (Baxter) is a global, diversified healthcare company. Baxter, through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. The Company operated in two segments: BioScience and Medication Delivery. It is engaged in the medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide. These products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices, clinical and medical research laboratories, and by patients at home under physician supervision. Baxter manufactures products in 27 countries and sells the products in more than 100 countries. In September 2013, Baxter International Inc completed the acquisition of Gambro AB. Effective July 9, 2014, Baxter International Inc acquired AesRX LLC.
BAX Chart

BAX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – PASS
  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 or be suitable for a defensive investor: Score = 4/5

  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 – FAIL
  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

Key Data:

Recent Price $75.53
MG Value $93.18
MG Opinion Fairly Valued
Value Based on 3% Growth $60.78
Value Based on 0% Growth $35.63
Market Implied Growth Rate 4.76%
Net Current Asset Value (NCAV) -$13.81
PEmg 18.02
Current Ratio 1.64
PB Ratio 4.72

Balance Sheet – 6/30/2014

Current Assets $9,487,000,000
Current Liabilities $5,795,000,000
Total Debt $7,528,000,000
Total Assets $25,629,000,000
Intangible Assets $6,555,000,000
Total Liabilities $16,967,000,000
Outstanding Shares 541,670,000

Earnings Per Share

2014 (estimate) $5.11
2013 $3.66
2012 $4.18
2011 $3.88
2010 $2.39
2009 $3.59
2008 $3.16
2007 $2.61
2006 $2.13
2005 $1.52
2004 $0.62

Earnings Per Share – ModernGraham

2014 (estimate) $4.19
2013 $3.67
2012 $3.60
2011 $3.24
2010 $2.88
2009 $2.95

Dividend History
BAX Dividend Chart

BAX Dividend data by YCharts

Conclusion:

Baxter International is not suitable for the Defensive Investor but does qualify for the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio and the high PB ratio, while the Enterprising Investor’s only initial concern is the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.88 in 2010 to an estimated $4.19 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 4.76% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out the previous ModernGraham valuations of Baxter International (BAX) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Baxter International (BAX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Baxter International (BAX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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