Medical

Agilent Technologies Inc Valuation – May 2018 $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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of A – 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 $20,506,289,918 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.32 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
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 -8.51% Fail
6. Moderate PEmg Ratio PEmg < 20 46.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.55 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 3.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.57 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 $1.37
MG Growth Estimate -4.25%
MG Value $1.09
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $19.93
MG Value based on 0% Growth $11.68
Market Implied Growth Rate 19.14%
Current Price $64.32
% of Intrinsic Value 5923.25%

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 stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. 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 $2.27 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.14% 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 below the price.

At the time of valuation, further research into Agilent Technologies Inc revealed the company was trading above its Graham Number of $16.43. The company pays a dividend of $0.53 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 46.79, which was above the industry average of 42.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.09.

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) $1.09
Graham Number $16.43
PEmg 46.79
Current Ratio 3.32
PB Ratio 4.55
Current Dividend $0.53
Dividend Yield 0.82%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $4,525,000,000
Total Current Liabilities $1,365,000,000
Long-Term Debt $1,800,000,000
Total Assets $8,784,000,000
Intangible Assets $2,932,000,000
Total Liabilities $4,171,000,000
Shares Outstanding (Diluted Average) 326,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.80
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
Oct1998 $0.56

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
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
Oct2002 -$0.09

Recommended Reading:

Other ModernGraham posts about the company

Agilent Technologies Inc Valuation – February 2017 $A
Agilent Technologies Inc Valuation – August 2016 $A
Agilent Technologies Inc Valuation – February 2016
Agilent Technologies Inc. Valuation – October 2015 Update $A
Agilent Technologies Inc. Analysis – July 2015 Update $A

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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.

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