Company Review: Agilent Technologies Inc. (A)
Company Profile: Agilent Technologies Inc. (obtained via Google Finance)
Agilent Technologies, Inc. (Agilent), incorporated in May 1999, is a measurement company providing core bio-analytical and electronic measurement solutions to the communications, electronics, life sciences and chemical analysis industries. The Company has two businesses: the electronic measurement business and the bio-analytical measurement business. Agilent’s electronic measurement business focuses on the communications and electronics industries, while its bio-analytical measurement business focuses on the life sciences industry and on the environmental, chemical, food and petrochemical industries. The Company sells its products primarily through direct sales, and also utilizes distributors, resellers, manufacturer’s representatives, telesales and electronic commerce. During the fiscal year ended October 31, 2006 (fiscal 2006), 34% of the revenues were generated in the United States and 66% outside the United States.
Â Business and Management Review
1) Is the business simple and understandable?Â
Agilent Technologies Inc., a spin-off of Hewlett-Packard Company, was established in 1999 as a provider of bio-analytical and electronic measurement solutions to the communications, electronics, life sciences, and chemical analysis industries. Their business model consists of manufacturing and selling electronic and bio-analytical measurements through distributors, resellers, manufacturer’s representatives, telesales and electronic commerce.
Â 2) Does the business have a consistent operating history?Â
Agilent has a long history of innovation and leadership in the communications, electronics, semiconductor, test and measurement, life sciences and chemical analysis industries. The company has a volatile operating history due in part to the HP spin-off, M&A (Mergers and Acquisitions) and introduction of new technology. Overall, after its successful IPO in 1999, Agilent is now a fully independent company focusing on high-growth markets in communications, electronics and life sciences. Â
3) Does the system have favorable long term prospects?Â
As being recognized as the industry leader in the test and measurement market, we expect this company to remain strong. The weakening of the U.S. dollar will be a driver for the companyâ€™s future performance as they may boost their foreign sales, which constitutes 66% of the companyâ€™s total revenues. This company recently introduced the industry’s first probing solution for â€œOscilloscope Measurements in Extreme Temperaturesâ€, which will give engineers the ability to explore signals at temperatures ranging from -55 C to 150 C. Moreover, Agilant Technologies Inc. also introduced a low-cost, small-footprint â€œAutomotive Test Solution with Essential Test Capabilitiesâ€ that will minimize the cost for testing automotive body control and safety electronic modules. These product introductions and many successful mergers that Agilent Technologies Inc. had been a part of in recent years might be the main factors that may drive up its success.Â We may need to keep an eye on Agilant Technologies Inc. fourth quarter earnings for Fiscal Year 2007 that will be disclosed on November 15th, as the earnings performance may give us a hint of where this company will be going in the future.
Â 4) Is management rational?Â
Agilent Technologies Inc. Gross Margin, Operating Margin, and Net Profit Margin are higher than the industry, meaning that the management is outperforming their competitors in sales and profits. We do believe management has made the right decisions while running Agilant Technologies Inc. Â
5) Is management candid with its shareholders?Â
Investor relationsâ€™ website provides the opportunity of listening to conference calls and any other event that Agilant Technologies Inc. may webcast through this page. We have not doubt that management is candid with their investors. Â
6) Does management resist the institutional imperative?Â
We do not suspect that management is following the institutional imperative. Â
Financial and Value ReviewDefensive
1) Size of firmÂ
It posses a market cap higher than two billion dollars. â€œPassâ€.
Â 2) Strong financial conditionÂ
This company has a current ratio greater than 2. â€œPassâ€.
Â 3) Earnings stabilityÂ
Agilent Technologies Inc. has not shown position Net Income for the past ten years. â€œFailâ€.
Â 4) Dividend recordÂ
They have not constantly pay dividends for the past ten years. â€œFailâ€.
Â 5) Earnings growthÂ
This company has experience a one-third increase in their EPS for the past 10 years. â€œPassâ€.
Â 6) Price to earnings analysisÂ
Its PE ratio is greater than 20. â€œFailâ€.
Â 7) Price to book analysisÂ
Agilent Technologies Inc. has PB and PB*PE ratios more than 2.5 and 50 respectively. â€œFailâ€.
After poorly scoring 3 out of 8 in the Defensive Investor Test, we do not believe these investors should locate this company into their portfolios.
1) Strong financial conditionÂ
Agilent Technologies Inc. shows a current ratio higher than 1.5 and debt to NCA ratio lower than 1.1, meaning that both of these tests pass. â€œPassâ€.
Â 2) Earnings stabilityÂ
This company has not sustained a positive Net Income for the past 5 years. â€œFailâ€.
Â 3) Dividend recordÂ
They are not paying dividends as of this date. â€œFailâ€.
Â 4) Earnings growthÂ
This business has maintained a positive earnings growth for the past 5 years. â€œPassâ€.
Â 5) PriceÂ
The organizationâ€™s stock price is more than 150% net tangible assets. â€œFailâ€.
We do believe that this is not a good investment choice for Enterprising Investors, because this company has only pass 3 of theÂ 5 tests.
We find the Fair value of Agilent TechnologiesÂ to be $36.
Since the company is trading at $36.35 we believe that the stock is fairly valued, but we do not find this company appropriate for neither Enterprise nor Defensive Investors.Â