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.
Downloadable PDF version of this valuation:
ModernGraham Valuation of BDX – 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 | $66,862,230,050 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.97 | 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 | 3.35% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 41.96 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 3.18 | 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 | 0.97 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -87.34 | 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 | $5.92 |
| MG Growth Estimate | 2.31% |
| MG Value | $77.69 |
| Opinion | Overvalued |
| MG Grade | C- |
| MG Value based on 3% Growth | $85.87 |
| MG Value based on 0% Growth | $50.34 |
| Market Implied Growth Rate | 16.73% |
| Current Price | $248.50 |
| % of Intrinsic Value | 319.88% |
Becton Dickinson and Co 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 $5.13 in 2015 to an estimated $5.92 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.73% 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 $145.91. The company pays a dividend of $3 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 41.96, 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 $-89.65.
Becton Dickinson and Co receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$89.65 |
| Graham Number | $145.91 |
| PEmg | 41.96 |
| Current Ratio | 0.97 |
| PB Ratio | 3.18 |
| Current Dividend | $3.00 |
| Dividend Yield | 1.21% |
| Number of Consecutive Years of Dividend Growth | 20 |
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Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Total Current Assets | $6,941,000,000 |
| Total Current Liabilities | $7,145,000,000 |
| Long-Term Debt | $17,817,000,000 |
| Total Assets | $52,932,000,000 |
| Intangible Assets | $39,565,000,000 |
| Total Liabilities | $31,528,000,000 |
| Shares Outstanding (Diluted Average) | 274,256,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $12.06 |
| Sep2018 | $0.60 |
| 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 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $5.92 |
| Sep2018 | $3.17 |
| 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 |
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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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