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Thermo Fisher Scientific Inc Valuation – February 2019 $TMO

Company Profile (excerpt from Reuters): Thermo Fisher Scientific Inc., incorporated on October 11, 1960, develops, manufactures and sells a range of products. The Company provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The Company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The Company serves various markets, such as pharmaceutical and biotech; academic and government; industrial and applied; as well as healthcare and diagnostics. The Company serves its customers through its brands, such as Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TMO – February 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 $101,078,782,817 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.71 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 170.43% Pass
6. Moderate PEmg Ratio PEmg < 20 31.11 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.69 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 1.71 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.01 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 $8.07
MG Growth Estimate 13.48%
MG Value $286.31
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $117.04
MG Value based on 0% Growth $68.61
Market Implied Growth Rate 11.30%
Current Price $251.09
% of Intrinsic Value 87.70%

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $4.25 in 2015 to an estimated $8.07 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.3% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $136.3. The company pays a dividend of $0.68 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 31.11, which was below the industry average of 51.18, 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 $-44.33.

Thermo Fisher Scientific 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) -$44.33
Graham Number $136.30
PEmg 31.11
Current Ratio 1.71
PB Ratio 3.69
Current Dividend $0.68
Dividend Yield 0.27%
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 12/1/2018
Total Current Assets $10,640,000,000
Total Current Liabilities $6,223,000,000
Long-Term Debt $17,719,000,000
Total Assets $56,181,000,000
Intangible Assets $40,325,000,000
Total Liabilities $28,595,000,000
Shares Outstanding (Diluted Average) 405,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.05
Dec2018 $7.24
Dec2017 $5.59
Dec2016 $5.09
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.07
Dec2018 $5.89
Dec2017 $5.06
Dec2016 $4.63
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76

Recommended Reading:

Other ModernGraham posts about the company

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
8 Best Stocks for Value Investors of the Week – 12/10/16
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO

Other ModernGraham posts about related companies

Illumina Inc Valuation – February 2019 $ILMN
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Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
Abiomed Inc Valuation – February 2019 $ABMD
Laboratory Corp of America Holdings Inc Valuation – January 2019 $LH

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.

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO

Company Profile (excerpt from Reuters): Thermo Fisher Scientific Inc., incorporated on October 11, 1960, develops, manufactures and sells a range of products. The Company provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The Company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The Company serves various markets, such as pharmaceutical and biotech; academic and government; industrial and applied; as well as healthcare and diagnostics. The Company serves its customers through its brands, such as Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services.

TMO Chart

TMO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TMO – April 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 $87,572,980,048 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 167.50% Pass
6. Moderate PEmg Ratio PEmg < 20 30.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 7.95 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 $7.05
MG Growth Estimate 13.06%
MG Value $244.12
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $102.25
MG Value based on 0% Growth $59.94
Market Implied Growth Rate 10.96%
Current Price $214.47
% of Intrinsic Value 87.86%

Thermo Fisher Scientific Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.77 in 2014 to an estimated $7.05 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 10.96% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $123.59. The company pays a dividend of $0.6 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 30.41, which was below the industry average of 44.81, 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 $-53.89.

Thermo Fisher Scientific Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$53.89
Graham Number $123.59
PEmg 30.41
Current Ratio 1.34
PB Ratio 3.42
Current Dividend $0.60
Dividend Yield 0.28%
Number of Consecutive Years of Dividend Growth 0

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 $9,421,000,000
Total Current Liabilities $7,048,000,000
Long-Term Debt $18,873,000,000
Total Assets $56,669,000,000
Intangible Assets $41,974,000,000
Total Liabilities $31,256,000,000
Shares Outstanding (Diluted Average) 405,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.72
Dec2017 $5.59
Dec2016 $5.09
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12
Dec1998 $1.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.05
Dec2017 $5.06
Dec2016 $4.63
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76
Dec2002 $0.46

Recommended Reading:

Other ModernGraham posts about the company

8 Best Stocks for Value Investors of the Week – 12/10/16
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO
19 Companies in the Spotlight This Week – 8/9/14

Other ModernGraham posts about related companies

Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
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Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH
Intuitive Surgical Inc valuation – March 2018 $ISRG

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.

Atmos Energy Corp Valuation – Initial Coverage $ATO

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 Undervalued Stocks for the Enterprising Investor – August 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 Atmos Energy Corp (ATO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Atmos Energy Corporation is a fully-regulated, natural-gas-only distributor engaged primarily in the regulated natural gas distribution and pipeline businesses, as well as other nonregulated natural gas businesses. It operates through three segments: regulated distribution segment, which includes its regulated distribution and related sales operations; regulated pipeline segment, which includes pipeline and storage operations of its Atmos Pipeline-Texas Division, and nonregulated segment, which includes its nonregulated natural gas management, nonregulated natural gas transmission, storage and other services. Its nonregulated businesses provide natural gas management, transportation and storage services to local gas distribution companies, including certain of its natural gas distribution divisions and industrial customers in the Midwest and Southeast. It also manages its natural gas pipeline and storage assets, including its intrastate natural gas pipeline systems in Texas.

ATO Chart

ATO data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ATO – August 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 $9,350,743,420 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 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 63.48% Pass
6. Moderate PEmg Ratio PEmg < 20 26.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.40 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.52 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 $3.35
MG Growth Estimate 5.96%
MG Value $68.41
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $48.58
MG Value based on 0% Growth $28.48
Market Implied Growth Rate 8.91%
Current Price $88.16
% of Intrinsic Value 128.87%

Atmos Energy Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.4 in 2013 to an estimated $3.35 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 8.91% 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 Atmos Energy Corporation revealed the company was trading above its Graham Number of $53.23.  The company pays a dividend of $1.68 per share, for a yield of 1.9%  Its PEmg (price over earnings per share – ModernGraham) was 26.32, which was above the industry average of 24.79.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-57.

Atmos Energy Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$57.00
Graham Number $53.23
PEmg 26.32
Current Ratio 0.72
PB Ratio 2.40
Current Dividend $1.68
Dividend Yield 1.91%
Number of Consecutive Years of Dividend Growth 20

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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 6/1/2017
Total Current Assets $534,382,000
Total Current Liabilities $745,659,000
Long-Term Debt $3,066,734,000
Total Assets $10,498,775,000
Intangible Assets $729,673,000
Total Liabilities $6,597,065,000
Shares Outstanding (Diluted Average) 106,364,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.78
Sep2016 $3.38
Sep2015 $3.09
Sep2014 $2.96
Sep2013 $2.64
Sep2012 $2.37
Sep2011 $2.27
Sep2010 $2.20
Sep2009 $2.07
Sep2008 $2.00
Sep2007 $1.92
Sep2006 $1.82
Sep2005 $1.69
Sep2004 $1.37
Sep2003 $1.39
Sep2002 $1.43
Sep2001 $1.47
Sep2000 $1.12
Sep1999 $0.58
Sep1998 $1.84
Sep1997 $0.81

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.35
Sep2016 $3.05
Sep2015 $2.81
Sep2014 $2.61
Sep2013 $2.40
Sep2012 $2.24
Sep2011 $2.15
Sep2010 $2.06
Sep2009 $1.96
Sep2008 $1.86
Sep2007 $1.74
Sep2006 $1.61
Sep2005 $1.50
Sep2004 $1.39
Sep2003 $1.33
Sep2002 $1.29
Sep2001 $1.21

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

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Eversource Energy Valuation – July 2017 $ES
PPL Corp Valuation – June 2017 $PPL
Entergy Corp Valuation – April 2017 $ETR
California Water Service Group Valuation – Initial Coverage $CWT
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Pinnacle West Corp Valuation – March 2017 $PNW
NiSource Inc Valuation – March 2017 $NI
Canadian Utilities Ltd Valuation – Initial Coverage $TSE:CU

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.

Thermo Fisher Scientific Inc Valuation – December 2016 $TMO

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 – August 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 Thermo Fisher Scientific Inc (TMO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Thermo Fisher Scientific Inc. develops, manufactures and sells a range of products. The Company is a provider of analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. Through the Life Sciences Solutions segment, it provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines, as well as diagnosis of disease. Through the Analytical Instruments segment, it provides instruments, consumables, software and services. The Specialty Diagnostics segment offers diagnostic test kits, reagents, culture media, instruments and associated products. The Laboratory Products and Services segment offers self-manufactured and sourced products for the laboratory.

TMO Chart

TMO 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]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of TMO – December 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 $56,910,236,492 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.56 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 159.20% Pass
6. Moderate PEmg Ratio PEmg < 20 29.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.60 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 1.56 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.75 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 $4.89
MG Growth Estimate 10.14%
MG Value $140.71
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $70.89
MG Value based on 0% Growth $41.55
Market Implied Growth Rate 10.26%
Current Price $141.85
% of Intrinsic Value 100.81%

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $2.92 in 2012 to an estimated $4.89 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 10.26% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $85.1. The company pays a dividend of $0.6 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 29.02, 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 $-45.67.

Thermo Fisher Scientific 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) -$45.67
Graham Number $85.10
PEmg 29.02
Current Ratio 1.56
PB Ratio 2.60
Current Dividend $0.60
Dividend Yield 0.42%
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 9/1/2016
Total Current Assets $8,204,400,000
Total Current Liabilities $5,259,900,000
Long-Term Debt $16,940,400,000
Total Assets $48,010,700,000
Intangible Assets $36,102,400,000
Total Liabilities $26,352,100,000
Shares Outstanding (Diluted Average) 397,400,000

Earnings Per Share History

Next Fiscal Year Estimate $5.87
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12
Dec1998 $1.08
Dec1997 $1.41
Dec1996 $1.22

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.89
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76
Dec2002 $0.46
Dec2001 -$0.04
Dec2000 $0.11

Recommended Reading:

Other ModernGraham posts about the company

Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO
19 Companies in the Spotlight This Week – 8/9/14
Thermo Fisher Scientific Inc. Annual Valuation – 2014 $TMO

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Waters Corporation Valuation – November 2016 $WAT
Align Technology Inc Valuation – August 2016 $ALGN
HCA Holdings Inc Valuation – August 2016 $HCA
Express Scripts Holding Co Valuation – August 2016 $ESRX
Universal Health Services Inc Valuation – August 2016 $UHS
Endo International PLC Valuation – August 2016 $ENDP
C R Bard Inc Valuation – August 2016 $BCR
Psychemedics Corp Valuation – August 2016 $PMD
Patterson Companies Inc Valuation – August 2016 $PDCO

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.

Thermo Fisher Scientific Inc Valuation – November 2016 $TMO

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 – August 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 Thermo Fisher Scientific Inc (TMO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Thermo Fisher Scientific Inc. develops, manufactures and sells a range of products. The Company is a provider of analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The company operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. Through the Life Sciences Solutions segment, it provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines, as well as diagnosis of disease. Through the Analytical Instruments segment, it provides instruments, consumables, software and services. The Specialty Diagnostics segment offers diagnostic test kits, reagents, culture media, instruments and associated products. The Laboratory Products and Services segment offers self-manufactured and sourced products for the laboratory.

TMO Chart

TMO data by YCharts

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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. 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.

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Downloadable PDF version of this valuation:

moderngraham-valuation-of-tmo-november-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 $55,721,693,300 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.56 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 197.49% Pass
6. Moderate PEmg Ratio PEmg < 20 24.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.57 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 1.56 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.75 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

tmo-value-chart-november-2016

EPSmg $5.65
MG Growth Estimate 14.07%
MG Value $207.06
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $81.95
MG Value based on 0% Growth $48.04
Market Implied Growth Rate 8.14%
Current Price $140.11
% of Intrinsic Value 67.67%

Thermo Fisher Scientific Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, 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 Undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2012 to an estimated $5.65 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.14% 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 Thermo Fisher Scientific Inc. revealed the company was trading above its Graham Number of $100.43. The company pays a dividend of $0.6 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 24.79, 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 $-45.67.

Thermo Fisher Scientific Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

tmo-value-chart-november-2016

Net Current Asset Value (NCAV) -$45.67
Graham Number $100.43
PEmg 24.79
Current Ratio 1.56
PB Ratio 2.57
Current Dividend $0.60
Dividend Yield 0.43%
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 9/1/2016
Total Current Assets $8,204,400,000
Total Current Liabilities $5,259,900,000
Long-Term Debt $16,940,400,000
Total Assets $48,010,700,000
Intangible Assets $36,102,400,000
Total Liabilities $26,352,100,000
Shares Outstanding (Diluted Average) 397,400,000

Earnings Per Share History

Next Fiscal Year Estimate $8.16
Dec2015 $4.92
Dec2014 $4.71
Dec2013 $3.48
Dec2012 $3.21
Dec2011 $3.46
Dec2010 $2.53
Dec2009 $2.01
Dec2008 $2.25
Dec2007 $1.72
Dec2006 $0.84
Dec2005 $1.36
Dec2004 $2.17
Dec2003 $1.20
Dec2002 $1.73
Dec2001 $0.00
Dec2000 -$0.22
Dec1999 -$1.12
Dec1998 $1.08
Dec1997 $1.41
Dec1996 $1.22

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.65
Dec2015 $4.25
Dec2014 $3.77
Dec2013 $3.18
Dec2012 $2.92
Dec2011 $2.64
Dec2010 $2.11
Dec2009 $1.82
Dec2008 $1.70
Dec2007 $1.44
Dec2006 $1.35
Dec2005 $1.50
Dec2004 $1.37
Dec2003 $0.76
Dec2002 $0.46
Dec2001 -$0.04
Dec2000 $0.11

Recommended Reading:

Other ModernGraham posts about the company

Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO
19 Companies in the Spotlight This Week – 8/9/14
Thermo Fisher Scientific Inc. Annual Valuation – 2014 $TMO

Other ModernGraham posts about related companies

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C R Bard Inc Valuation – August 2016 $BCR
Psychemedics Corp Valuation – August 2016 $PMD
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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.

Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO

thermo-fisher-scientificBenjamin 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 Most Undervalued Companies for the Defensive Investor – July 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 Thermo Fisher Scientific Inc. (TMO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Thermo Fisher Scientific Inc. is a provider of analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. The company operates through four segments: Life Sciences Solutions, provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease; Analytical Instruments, provides instruments, consumables, software and services that are used in the laboratory; Specialty Diagnostics, offers diagnostic test kits, reagents, culture media, instruments and associated products, and Laboratory Products and Services, offers self-manufactured and sourced products for the laboratory.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  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 – FAIL
  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 – FAIL
  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 = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  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 $138.01
MG Value $181.71
MG Opinion Fairly Valued
Value Based on 3% Growth $73.38
Value Based on 0% Growth $43.02
Market Implied Growth Rate 9.39%
Net Current Asset Value (NCAV) -$37.01
PEmg 27.27
Current Ratio 1.02
PB Ratio 2.68

Balance Sheet – June 2015

Current Assets $6,237,000,000
Current Liabilities $6,100,000,000
Total Debt $10,664,000,000
Total Assets $41,774,000,000
Intangible Assets $32,191,000,000
Total Liabilities $21,095,000,000
Outstanding Shares 401,500,000

Earnings Per Share

2015 (estimate) $7.35
2014 $4.71
2013 $3.48
2012 $3.21
2011 $3.46
2010 $2.53
2009 $2.01
2008 $2.25
2007 $1.72
2006 $0.84
2005 $1.36

Earnings Per Share – ModernGraham

2015 (estimate) $5.06
2014 $3.77
2013 $3.18
2012 $2.92
2011 $2.64
2010 $2.11

Dividend History

Free Cash Flow

Conclusion:

Thermo Fisher Scientific Inc. does not qualify for either the Defensive Investor and the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, short dividend record, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a speculative attitude.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.64 in 2011 to an estimated $5.06 for 2015.  This level of earnings growth supports the market’s implied estimate of 9.39% annual earnings growth over the next 7-10 years, and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling 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 Thermo Fisher Scientific Inc. (TMO)?  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 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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Thermo Fisher Scientific Inc. Annual Valuation – 2014 $TMO

thermo-fisher-scientificBenjamin 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 Defensive Investor with High Dividend Yields.  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 Thermo Fisher Scientific (TMO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Thermo Fisher Scientific Inc. (Thermo Fisher) is engaged in serving science. The Company operates in three segments: Analytical Technologies, Specialty Diagnostics and Laboratory Products and Services. The Company serves its customers through three brands: Thermo Scientific, Fisher Scientific and Unity Lab Services. Thermo Scientific is its technology brand, offering customers a range of high-end analytical instruments, as well as laboratory equipment, software, services, consumables and reagents to enable laboratory workflow solutions. In March 2014, General Electric Co announced that its GE Healthcare, a unit of General Electric Company has acquired cell culture (sera and media), gene modulation and magnetic beads businesses from Thermo Fisher Scientific Inc.
TMO Chart

TMO data by YCharts

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 – FAIL
  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 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  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 $121.38
MG Value $170.58
MG Opinion Undervalued
Value Based on 3% Growth $64.24
Value Based on 0% Growth $37.66
Market Implied Growth Rate 9.45%
Net Current Asset Value (NCAV) -$44.35
PEmg 27.40
Current Ratio 0.95
PB Ratio 2.35

Balance Sheet – 6/28/2014

Current Assets $5,944,400,000
Current Liabilities $6,235,600,000
Total Debt $12,502,000,000
Total Assets $44,313,400,000
Intangible Assets $35,060,900,000
Total Liabilities $23,654,800,000
Outstanding Shares 399,350,000

Earnings Per Share

2014 (estimate) $6.87
2013 $3.50
2012 $3.43
2011 $2.65
2010 $2.52
2009 $2.01
2008 $2.27
2007 $1.76
2006 $0.82
2005 $1.21
2004 $1.31

Earnings Per Share – ModernGraham

2014 (estimate) $4.43
2013 $3.08
2012 $2.77
2011 $2.38
2010 $2.12
2009 $1.82

Dividend History
TMO Dividend Chart

TMO Dividend data by YCharts

Conclusion:

Thermo Fisher Scientific does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the low current ratio, the lack of a long dividend history, and the high PEmg ratio while the Enterprising Investor is concerned with the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of General Electric (GE) and ModernGraham’s valuation of Agilent Technologies (A).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.12 in 2010 to an estimated $4.43 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 9.45% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above 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 Thermo Fisher Scientific (TMO)?  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 Thermo Fisher Scientific (TMO) 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.

Linde PLC Valuation – April 2019 #LIN

Company Profile (excerpt from Reuters): Linde plc, incorporated on April 18, 2017, is an industrial gases and engineering company that operates through its subsidiaries. The Company provides atmospheric gases (oxygen, nitrogen, argon and rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases and acetylene). It designs, engineers and builds equipment that produces industrial gases primarily for internal use. It also offers gaseous medication and related medical products and devices for patients and medical staff. The Company serves the customers in various industries, including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LIN – April 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 $100,601,281,539 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 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 26.09% Fail
6. Moderate PEmg Ratio PEmg < 20 32.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.99 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 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.92 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 $5.70
MG Growth Estimate 0.33%
MG Value $52.23
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $82.69
MG Value based on 0% Growth $48.47
Market Implied Growth Rate 11.94%
Current Price $184.62
% of Intrinsic Value 353.45%

Linde PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $5.58 in 2014 to an estimated $5.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.94% 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 Linde PLC revealed the company was trading above its Graham Number of $58.47. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 32.37, which was above the industry average of 23.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.09.

Linde PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.09
Graham Number $58.47
PEmg 32.37
Current Ratio 0.86
PB Ratio 7.99
Current Dividend $3.15
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 20

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 9/1/2018
Total Current Assets $3,305,000,000
Total Current Liabilities $3,860,000,000
Long-Term Debt $6,615,000,000
Total Assets $19,979,000,000
Intangible Assets $3,714,000,000
Total Liabilities $13,244,000,000
Shares Outstanding (Diluted Average) 291,513,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.24
Dec2017 $4.32
Dec2016 $5.21
Dec2015 $5.35
Dec2014 $5.73
Dec2013 $5.87
Dec2012 $5.61
Dec2011 $5.45
Dec2010 $3.84
Dec2009 $4.01
Dec2008 $3.80
Dec2007 $3.62
Dec2006 $3.00
Dec2005 $2.20
Dec2004 $2.10
Dec2003 $1.77
Dec2002 $1.24
Dec2001 $1.31
Dec2000 $1.13
Dec1999 $1.33
Dec1998 $1.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.70
Dec2017 $5.05
Dec2016 $5.47
Dec2015 $5.60
Dec2014 $5.58
Dec2013 $5.32
Dec2012 $4.88
Dec2011 $4.39
Dec2010 $3.79
Dec2009 $3.62
Dec2008 $3.27
Dec2007 $2.84
Dec2006 $2.33
Dec2005 $1.90
Dec2004 $1.67
Dec2003 $1.42
Dec2002 $1.25

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

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Eastman Chemical Co Valuation – January 2019 $EMN
DowDuPont Inc Valuation – November 2018 $DWDP
Chemtrade Logistics Income Fund Valuation – July 2018 $TSE:CHE.UN

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.

Agilent Technologies Inc Valuation – March 2019 #A

Company Profile (excerpt from Reuters): Agilent Technologies, Inc., incorporated on May 4, 1999, provides application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. The Company has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. The life sciences and applied markets business segment brings together the Company’s analytical laboratory instrumentation and informatics. The Company’s diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. The Company’s Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of A – 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 $24,759,898,745 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -24.07% Fail
6. Moderate PEmg Ratio PEmg < 20 39.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 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 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 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 $1.96
MG Growth Estimate 0.62%
MG Value $19.11
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $28.45
MG Value based on 0% Growth $16.68
Market Implied Growth Rate 15.62%
Current Price $77.98
% of Intrinsic Value 407.98%

Agilent Technologies 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 poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 $1.88 in 2015 to an estimated $1.96 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.62% 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 Agilent Technologies Inc revealed the company was trading above its Graham Number of $31.39. The company pays a dividend of $0.6 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 39.75, 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 $-0.63.

Agilent Technologies 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) -$0.63
Graham Number $31.39
PEmg 39.75
Current Ratio 3.39
PB Ratio 4.99
Current Dividend $0.60
Dividend Yield 0.76%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $3,712,000,000
Total Current Liabilities $1,095,000,000
Long-Term Debt $1,798,000,000
Total Assets $8,952,000,000
Intangible Assets $3,699,000,000
Total Liabilities $3,916,000,000
Shares Outstanding (Diluted Average) 322,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Oct2018 $0.97
Oct2017 $2.10
Oct2016 $1.40
Oct2015 $1.20
Oct2014 $1.62
Oct2013 $2.13
Oct2012 $3.27
Oct2011 $2.85
Oct2010 $1.94
Oct2009 -$0.09
Oct2008 $1.87
Oct2007 $1.57
Oct2006 $7.50
Oct2005 $0.65
Oct2004 $0.75
Oct2003 -$4.35
Oct2002 -$2.22
Oct2001 $0.38
Oct2000 $1.66
Oct1999 $1.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.96
Oct2018 $1.43
Oct2017 $1.67
Oct2016 $1.61
Oct2015 $1.88
Oct2014 $2.27
Oct2013 $2.40
Oct2012 $2.35
Oct2011 $1.80
Oct2010 $1.71
Oct2009 $1.83
Oct2008 $2.68
Oct2007 $2.46
Oct2006 $2.10
Oct2005 -$0.72
Oct2004 -$1.19
Oct2003 -$1.65

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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.

ResMed Inc Valuation – March 2019 #RMD

Company Profile (excerpt from Reuters): ResMed Inc., incorporated on March 31, 1994, is a holding company. The Company is engaged in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease (COPD), neuromuscular disease and other diseases. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. The Company’s cloud-based software digital health applications, along with its devices, are designed to provide connected care to improve patient outcomes. The Company offers a treatment, nasal Continuous Positive Airway Pressure (CPAP), for OSA. CPAP systems deliver pressurized air, typically through a nasal mask, to prevent collapse of the upper airway during sleep. Its manufacturing operations are located in Australia, Singapore, Malaysia, France and the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RMD – 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 $14,454,671,393 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 74.20% Pass
6. Moderate PEmg Ratio PEmg < 20 39.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.46 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 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.89 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 $2.57
MG Growth Estimate 2.51%
MG Value $34.82
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $37.32
MG Value based on 0% Growth $21.88
Market Implied Growth Rate 15.38%
Current Price $101.06
% of Intrinsic Value 290.28%

ResMed Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, 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 $2.2 in 2015 to an estimated $2.57 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.38% 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 below the price.

At the time of valuation, further research into ResMed Inc. revealed the company was trading above its Graham Number of $31.42. The company pays a dividend of $1.4 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 39.26, 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 $-5.82.

ResMed 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) -$5.82
Graham Number $31.42
PEmg 39.26
Current Ratio 2.44
PB Ratio 7.46
Current Dividend $1.40
Dividend Yield 1.39%
Number of Consecutive Years of Dividend Growth 6

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ModernGraham tagged articles Morningstar
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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,063,539,000
Total Current Liabilities $436,443,000
Long-Term Debt $1,185,500,000
Total Assets $3,859,816,000
Intangible Assets $2,243,971,000
Total Liabilities $1,903,772,000
Shares Outstanding (Diluted Average) 144,349,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Jun2018 $2.19
Jun2017 $2.40
Jun2016 $2.49
Jun2015 $2.47
Jun2014 $2.39
Jun2013 $2.10
Jun2012 $1.71
Jun2011 $1.44
Jun2010 $1.23
Jun2009 $0.95
Jun2008 $0.70
Jun2007 $0.43
Jun2006 $0.58
Jun2005 $0.46
Jun2004 $0.41
Jun2003 $0.33
Jun2002 $0.28
Jun2001 $0.09
Jun2000 $0.17
Jun1999 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.57
Jun2018 $2.36
Jun2017 $2.42
Jun2016 $2.36
Jun2015 $2.20
Jun2014 $1.97
Jun2013 $1.67
Jun2012 $1.37
Jun2011 $1.12
Jun2010 $0.90
Jun2009 $0.70
Jun2008 $0.55
Jun2007 $0.46
Jun2006 $0.46
Jun2005 $0.37
Jun2004 $0.30
Jun2003 $0.23

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Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
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

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.

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