PerkinElmer Inc. Annual Stock Valuation – 2014 $PKI

PKIBenjamin 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 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  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 PerkinElmer Inc. (PKI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): PerkinElmer, Inc. is a provider of products, services and solutions to the diagnostics, research, environmental, industrial and laboratory services markets. Through the Company’s advanced technologies, solutions, and services, it addresses issues related to health and safety of people and their environment. It operates in two segments: Human Health and Environmental Health. The Company’s Human Health segment concentrates on developing diagnostics, tools and applications to help detect diseases earlier and accelerate the discovery and development of critical new therapies. The Company’s Environmental Health segment provides technologies and applications to facilitate the creation of safer food and consumer products, secure surroundings and energy resources.
PKI Chart

PKI 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 - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - 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 - 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 - FAIL

Valuation Summary

Key Data:

Recent Price $40.00
MG Value $8.91
MG Opinion Overvalued
Value Based on 3% Growth $22.63
Value Based on 0% Growth $13.27
Market Implied Growth Rate 8.57%
Net Current Asset Value (NCAV) -$7.02
PEmg 25.63
Current Ratio 1.87
PB Ratio 2.22

Balance Sheet – 6/30/2014

Current Assets $1,081,000,000
Current Liabilities $579,000,000
Total Debt $894,000,000
Total Assets $3,937,000,000
Intangible Assets $2,559,000,000
Total Liabilities $1,881,000,000
Outstanding Shares 114,000,000

Earnings Per Share

2014 (estimate) $2.45
2013 $1.47
2012 $0.61
2011 $0.07
2010 $3.31
2009 $0.73
2008 $1.07
2007 $1.09
2006 $0.95
2005 $2.04
2004 $0.74

Earnings Per Share – ModernGraham

2014 (estimate) $1.56
2013 $1.16
2012 $1.05
2011 $1.27
2010 $1.72
2009 $1.01

Dividend History
PKI Dividend Chart

PKI Dividend data by YCharts


PerkinElmer is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient level of earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor has an issue with the level of debt relative to the net current assets and the lack of growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.72 in 2010 to an estimated $1.56 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 8.57% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below 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 PerkinElmer Inc. (PKI)?  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 PerkinElmer Inc. (PKI) 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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