Becton Dickinson and Co Valuation – May 2018 $BDX

Company Profile (excerpt from Reuters): Becton, Dickinson and Company (BD), incorporated in November 1906, is a global medical technology company engaged in the development, manufacture and sale of a range of medical supplies, devices, laboratory equipment and diagnostic products. The Company operates through two segments: BD Medical and BD Life Sciences. It provides customer solutions that are focused on managing medication management and patient safety; supporting infection prevention practices; equipping surgical and interventional procedures; managing drug delivery; aiding anesthesiology care; managing the diagnosis of infectious diseases and cancers; advancing cellular research and applications, and supporting the management of diabetes. The Company caters to markets, such as healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s subsidiaries include Accuri Cytometers, Inc., BD Norge AS, CareFusion Canada 307 ULC, Vital Signs Hong Kong Limited and Dantor S.A.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – 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 $59,814,032,039 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 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 24.47% Fail
6. Moderate PEmg Ratio PEmg < 20 33.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 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 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.35 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 $6.62
MG Growth Estimate 1.66%
MG Value $78.27
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $96.00
MG Value based on 0% Growth $56.28
Market Implied Growth Rate 12.72%
Current Price $224.66
% of Intrinsic Value 287.04%

Becton Dickinson and Co is suitable for the Enterprising Investor but not 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 ratio. 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 $5.96 in 2014 to an estimated $6.62 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.72% 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 Becton Dickinson and Co revealed the company was trading above its Graham Number of $118.29. The company pays a dividend of $2.92 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 33.93, 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 $-115.52.

Becton Dickinson and Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$115.52
Graham Number $118.29
PEmg 33.93
Current Ratio 1.54
PB Ratio 2.43
Current Dividend $2.92
Dividend Yield 1.30%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $7,542,000,000
Total Current Liabilities $4,895,000,000
Long-Term Debt $22,095,000,000
Total Assets $55,363,000,000
Intangible Assets $41,377,000,000
Total Liabilities $34,116,000,000
Shares Outstanding (Diluted Average) 230,038,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.95
Sep2017 $4.60
Sep2016 $4.49
Sep2015 $3.35
Sep2014 $5.99
Sep2013 $6.49
Sep2012 $5.59
Sep2011 $5.62
Sep2010 $5.49
Sep2009 $4.99
Sep2008 $4.46
Sep2007 $3.49
Sep2006 $2.93
Sep2005 $2.77
Sep2004 $1.77
Sep2003 $2.07
Sep2002 $1.79
Sep2001 $1.49
Sep2000 $1.49
Sep1999 $1.04
Sep1998 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.62
Sep2017 $4.63
Sep2016 $4.83
Sep2015 $5.13
Sep2014 $5.96
Sep2013 $5.84
Sep2012 $5.42
Sep2011 $5.16
Sep2010 $4.71
Sep2009 $4.13
Sep2008 $3.49
Sep2007 $2.87
Sep2006 $2.46
Sep2005 $2.15
Sep2004 $1.80
Sep2003 $1.73
Sep2002 $1.49

Recommended Reading:

Other ModernGraham posts about the company

5 of the Worst Stocks to Invest In – January 2017
Becton Dickinson and Co Valuation – January 2017 $BDX
Becton Dickinson & Company Analysis – August 2015 Update $BDX
30 Companies in the Spotlight This Week – 5/23/15
Becton Dickinson and Company Quarterly Valuation – May 2015 $BDX

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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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