Becton Dickinson and Co Valuation – February 2019 $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.

 

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

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

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

Recommended Reading:

Other ModernGraham posts about the company

Becton Dickinson and Co Valuation – May 2018 $BDX
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

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK
Align Technology Inc Valuation – February 2019 $ALGN
Quest Diagnostics Inc Valuation – February 2019 $DGX
AmerisourceBergen Corp Valuation – February 2019 $ABC
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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.

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.

BDX Chart

BDX data by YCharts

 

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

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

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

Other ModernGraham posts about related companies

Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX
Stryker Corp Valuation – April 2018 $SYK
Cerner Corporation Valuation – April 2018 $CERN
Quest Diagnostics Inc Valuation – April 2018 $DGX
Laboratory Corporation of America Holdings Valuation – March 2018 $LH

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.

Becton Dickinson and Co Valuation – January 2017 $BDX

Benjamin 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 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  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 stock analysis showing a specific look at how Becton Dickinson and Co (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton, Dickinson and Company (BD) 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. The BD Medical segment produces an array of medical technologies and devices that are used to help improve healthcare delivery in a range of settings. BD Medical consists of various business units, including diabetes care, medication and procedural solutions, medication management solutions and pharmaceutical systems. The BD Life Sciences segment provides products for the safe collection and transport of diagnostics specimens, and instruments and reagent systems to detect a range of infectious diseases, healthcare-associated infections and cancers. The Company’s BD Life Sciences segment consists of various business units, including preanalytical systems, diagnostic systems and biosciences.

 

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – January 2017

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 $36,470,771,094 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 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 -10.71% Fail
6. Moderate PEmg Ratio PEmg < 20 34.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.78 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 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.36 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $4.93
MG Growth Estimate -2.34%
MG Value $18.86
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $71.51
MG Value based on 0% Growth $41.92
Market Implied Growth Rate 12.77%
Current Price $167.89
% of Intrinsic Value 890.18%

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, and the lack of earnings growth over the last five years. 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 seeing its EPSmg (normalized earnings) decline from $5.84 in 2013 to an estimated $4.93 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.77% 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 $66.55. The company pays a dividend of $2.64 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 34.04, which was above the industry average of 32.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-53.26.

Becton Dickinson and Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$53.26
Graham Number $66.55
PEmg 34.04
Current Ratio 1.45
PB Ratio 4.78
Current Dividend $2.64
Dividend Yield 1.57%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $6,367,000,000
Total Current Liabilities $4,400,000,000
Long-Term Debt $10,550,000,000
Total Assets $25,586,000,000
Intangible Assets $13,770,000,000
Total Liabilities $17,953,000,000
Shares Outstanding (Diluted Average) 217,536,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.50
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
Sep1997 $1.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.93
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
Sep2001 $1.30

Recommended Reading:

Other ModernGraham posts about the company

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
34 Companies in the Spotlight This Week – 2/7/15
Becton, Dickinson and Company Quarterly Valuation – February 2015 $BDX

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Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Illumina Inc Valuation – Initial Coverage $ILMN
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO
Waters Corporation Valuation – November 2016 $WAT
Align Technology Inc Valuation – August 2016 $ALGN
HCA Holdings Inc Valuation – August 2016 $HCA

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.

Becton Dickinson & Company Analysis – August 2015 Update $BDX

Benjamin 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 10 Most Undervalued Companies for the Defensive Investor – August 2015.  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 stock analysis showing a specific look at how Becton Dickinson & Company (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton Dickinson and Co. is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. The BD Medical segment manufactures syringes, needles and other products used in a range of healthcare settings. The BD Diagnostics segment collects and transport diagnostics specimens. The BD Biosciences segment produces clinical research tools that aid discovery and development of new drugs and vaccines.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BDX – August 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
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 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 5.50
MG Growth Estimate 0.97%
MG Value $57.33
Opinion Overvalued
MG Value based on 3% Growth $79.68
MG Value based on 0% Growth $46.71
Market Implied Growth Rate 9.08%
Current Price $146.53
% of Intrinsic Value 255.58%

Becton Dickinson & Company does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $5.16 in 2012 to an estimated $5.50 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 9.08% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns 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 Becton Dickinson & Company (BDX)?  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.

Stage 3: Information for Further Research

BDX charts August 2015

Net Current Asset Value (NCAV) -$62.92
PEmg 26.66
Current Ratio 1.40
PB Ratio 4.34
Dividend Yield 1.60%
Number of Consecutive Years of Dividend Growth 20

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $6,303,000,000
Total Current Liabilities $4,517,000,000
Long-Term Debt $11,367,000,000
Total Assets $27,079,000,000
Intangible Assets $14,973,000,000
Total Liabilities $19,826,000,000
Shares Outstanding (Diluted Average) 214,928,000

Earnings Per Share History

Next Fiscal Year Estimate $4.44
Sep14 $5.99
Sep13 $6.49
Sep12 $5.59
Sep11 $5.62
Sep10 $5.49
Sep09 $4.99
Sep08 $4.46
Sep07 $3.49
Sep06 $2.93
Sep05 $2.77
Sep04 $1.77
Sep03 $2.07
Sep02 $1.79
Sep01 $1.49
Sep00 $1.49
Sep99 $1.04
Sep98 $0.90
Sep97 $1.15
Sep96 $1.06
Sep95 $0.90

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.50
Sep14 $5.96
Sep13 $5.84
Sep12 $5.42
Sep11 $5.16
Sep10 $4.71
Sep09 $4.13
Sep08 $3.49
Sep07 $2.87
Sep06 $2.46
Sep05 $2.15
Sep04 $1.80
Sep03 $1.73
Sep02 $1.49
Sep01 $1.30
Sep00 $1.18
Sep99 $1.02

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 5/23/15
Becton Dickinson and Company Quarterly Valuation – May 2015 $BDX
34 Companies in the Spotlight This Week – 2/7/15
Becton, Dickinson and Company Quarterly Valuation – February 2015 $BDX
27 Companies in the Spotlight This Week – 11/8/14

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Quest Diagnostics Inc. Analysis – July 2015 Update $DGX

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.  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.

Becton Dickinson and Company Quarterly Valuation – May 2015 $BDX

200px-Becton_Dickinson-ColorLogo.svgBenjamin 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 Most Undervalued Companies for the Defensive Investor – May 2015.  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 Becton Dickinson and Co. (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton Dickinson and Co. is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. The BD Medical segment manufactures syringes, needles and other products used in a range of healthcare settings. The BD Diagnostics segment collects and transport diagnostics specimens. The BD Biosciences segment produces clinical research tools that aid discovery and development of new drugs and vaccines.

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 - PASS
  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 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  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 - PASS

Valuation Summary

Key Data:

Recent Price $141.97
MG Value $81.26
MG Opinion Overvalued
Value Based on 3% Growth $87.32
Value Based on 0% Growth $51.19
Market Implied Growth Rate 7.54%
Net Current Asset Value (NCAV) -$70.73
PEmg 23.58
Current Ratio 1.56
PB Ratio 3.96

Balance Sheet – March 2015

Current Assets $6,996,000,000
Current Liabilities $4,497,000,000
Total Debt $12,128,000,000
Total Assets $28,293,000,000
Intangible Assets $15,566,000,000
Total Liabilities $21,134,000,000
Outstanding Shares 199,900,000

Earnings Per Share

2015 (estimate) $6.02
2014 $5.99
2013 $6.49
2012 $5.59
2011 $5.62
2010 $5.49
2009 $4.99
2008 $4.46
2007 $3.49
2006 $2.93
2005 $2.77

Earnings Per Share – ModernGraham

2015 (estimate) $6.02
2014 $5.96
2013 $5.84
2012 $5.42
2011 $5.16
2010 $4.71

Dividend History

Conclusion:

Becton Dickinson and Co. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the low current ratio, as well as the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $5.16 in 2011 to only an estimated $6.02 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.54% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling 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 Becton Dickinson and Co. (BDX)?  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 any 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.

Becton, Dickinson and Company Quarterly Valuation – February 2015 $BDX

200px-Becton_Dickinson-ColorLogo.svgBenjamin 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 Most Undervalued Companies for the Defensive Investor – January 2015.  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 Becton Dickinson & Company (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton Dickinson and Co is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. BD Medical produces a range of medical devices, which are used in a range of healthcare settings. BD Biosciences produces research and clinical tools that facilitate the study of cells, and the components of cells. BD Diagnostics provides products for the safe collection and transport of diagnostics specimens. On March 11, 2013, the Company acquired a 100% interest in Cato Software Solutions (Cato).

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  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 - PASS
  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 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  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 - PASS
  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 - PASS

Valuation Summary

Key Data:

Recent Price $143.32
MG Value $89.16
MG Opinion Overvalued
Value Based on 3% Growth $89.64
Value Based on 0% Growth $52.55
Market Implied Growth Rate 7.34%
Net Current Asset Value (NCAV) -$6.43
PEmg 23.18
Current Ratio 2.74
PB Ratio 5.57

Balance Sheet – September 2014

Current Assets $6,131,000,000
Current Liabilities $2,235,000,000
Total Debt $3,768,000,000
Total Assets $12,447,000,000
Intangible Assets $2,215,000,000
Total Liabilities $7,394,000,000
Outstanding Shares 196,500,000

Earnings Per Share

2015 (estimate) $6.50
2014 $5.99
2013 $6.49
2012 $5.59
2011 $5.62
2010 $5.49
2009 $4.99
2008 $4.46
2007 $3.49
2006 $2.93
2005 $2.77

Earnings Per Share – ModernGraham

2015 (estimate) $6.18
2014 $5.96
2013 $5.84
2012 $5.42
2011 $5.16
2010 $4.71

Dividend History

Conclusion:

Becton Dickinson & Company is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns as the company passes all of the investor type’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $5.16 in 2011 to an estimated $6.18 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 7.34% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Becton Dickinson & Co. (BDX) for greater perspective!

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 Becton Dickinson & Co. (BDX)?  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 Becton Dickinson & Co. (BDX) 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.

Becton Dickinson and Company Quarterly Valuation – November 2014 $BDX

200px-Becton_Dickinson-ColorLogo.svg

Becton Dickinson certainly should attract the Enterprising Investor’s initial attention as the company passes all of the investor type’s requirements. Defensive Investors, on the other hand, should look at other opportunities at this time, with concerns regarding the high PEmg and PB ratios. That said, Enterprising Investors are less conservative and should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

Such a determination requires looking at the company’s earnings growth and examining the market’s implied estimate of further growth. The company has grown its EPSmg (normalized earnings) from $4.71 in 2010 to an estimated $6.05 for 2014. This level of demonstrated growth does not support the market’s implied estimate for earnings growth of 6.22% over the next 7-10 years. A more conservative estimate for growth would be around 4.27% based on the historical performance of the company and discounting for possible changes in the future. As a result, the ModernGraham valuation model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.

Be sure to check out previous ModernGraham valuations of Becton, Dickinson and Co. for better perspective!

Read the full valuation on Seeking Alpha!

BDX Chart

BDX data by YCharts

Becton Dickinson and Co. Quarterly Valuation – July 2014 $BDX

200px-Becton_Dickinson-ColorLogo.svgBenjamin 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 Undervalued Companies for the Defensive Investor.  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 Becton Dickinson and Co. (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton Dickinson and Co is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. BD Medical produces a range of medical devices, which are used in a range of healthcare settings. BD Biosciences produces research and clinical tools that facilitate the study of cells, and the components of cells. BD Diagnostics provides products for the safe collection and transport of diagnostics specimens. On March 11, 2013, the Company acquired a 100% interest in Cato Software Solutions (Cato).
BDX Chart

BDX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  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 - PASS
  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 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  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 – PASS
  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 – PASS

Valuation Summary

Key Data:

Recent Price $118.61
MG Value $82.36
MG Opinion Overvalued
Value Based on 3% Growth $79.23
Value Based on 0% Growth $46.44
Market Implied Growth Rate 6.60%
Net Current Asset Value (NCAV) -$5.12
PEmg 21.71
Current Ratio 2.95
PB Ratio 4.31

Balance Sheet – 3/31/2014

Current Assets $5,946,000,000
Current Liabilities $2,016,000,000
Total Debt $3,764,000,000
Total Assets $12,250,000,000
Intangible Assets $2,309,000,000
Total Liabilities $6,935,000,000
Outstanding Shares 193,200,000

Earnings Per Share

2014 (estimate) $6.26
2013 $4.67
2012 $5.30
2011 $5.59
2010 $4.90
2009 $4.92
2008 $4.46
2007 $3.36
2006 $2.95
2005 $2.66
2004 $2.21

Earnings Per Share – ModernGraham

2014 (estimate) $5.46
2013 $5.07
2012 $5.19
2011 $4.97
2010 $4.48
2009 $4.07

Dividend History

BDX Dividend Chart

BDX Dividend data by YCharts

Conclusion:

Becton Dickinson and Co. qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the high PEmg and PB ratios.  Meanwhile the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities including a review of ModernGraham’s valuation of Covidien (COV).  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.48 in 2010 to an estimated $5.46 for 2014. This level of demonstrated growth does not support the market’s implied estimate of 6.6% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Becton Dickinson and Co. (BDX) for more perspective!

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 Becton Dickinson and Co. (BDX)?  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 Becton Dickinson and Co. (BDX) 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.

Becton Dickinson and Co. (BDX) Quarterly Valuation – April 2014

200px-Becton_Dickinson-ColorLogo.svgBenjamin 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 5 Undervalued Companies for the Enterprising Investor.  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 Becton Dickinson and Co. (BDX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Becton Dickinson and Co is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. BD Medical produces a range of medical devices, which are used in a range of healthcare settings. BD Biosciences produces research and clinical tools that facilitate the study of cells, and the components of cells. BD Diagnostics provides products for the safe collection and transport of diagnostics specimens. On March 11, 2013, the Company acquired a 100% interest in Cato Software Solutions (Cato).

BDX Chart

BDX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  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 – PASS
  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 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  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 – PASS
  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 – PASS

Valuation Summary

Key Data:

Recent Price $113.55
MG Value $81.33
MG Opinion Overvalued
Value Based on 3% Growth $78.94
Value Based on 0% Growth $46.27
Market Implied Growth Rate 6.18%
Net Current Asset Value (NCAV) -$6.29
PEmg 20.86
Current Ratio 2.88
PB Ratio 4.32

Balance Sheet – 12/31/2013

Current Assets $5,743,000,000
Current Liabilities $1,997,000,000
Total Debt $3,764,000,000
Total Assets $12,035,000,000
Intangible Assets $2,294,000,000
Total Liabilities $6,957,000,000
Outstanding Shares 193,020,000

Earnings Per Share

2014 (estimate) $6.20
2013 $4.67
2012 $5.30
2011 $5.59
2010 $4.90
2009 $4.92
2008 $4.46
2007 $3.36
2006 $2.95
2005 $2.66
2004 $2.21

Earnings Per Share – ModernGraham

2014 (estimate) $5.44
2013 $5.07
2012 $5.19
2011 $4.97
2010 $4.48
2009 $4.07

Dividend History

BDX Dividend Chart

BDX Dividend data by YCharts

Conclusion:

Becton Dickinson is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the company’s high PEmg and PB ratios, but the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the company and comparison to other opportunities through a review of ModernGraham’s valuation of Covidien (COV) and 5 Undervalued Companies for the Defensive Investor.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.48 in 2010 to only an estimated $5.44 for 2014.  This low level of demonstrated growth does not support the market’s implied estimate of 6.18% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls below the market 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 Becton Dickinson and Co. (BDX)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Becton Dickinson and Co. (BDX) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

DaVita Inc Valuation – March 2019 #DVA

Company Profile (excerpt from Reuters): DaVita Inc., formerly DaVita HealthCare Partners Inc., incorporated on April 4, 1994, operates two divisions: DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division consists of the Company’s the United States dialysis and related lab services, its ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. Its DMG division is a patient- and physician-focused integrated healthcare delivery and management company that provides medical services to members primarily through capitation contracts with some of the nation’s health plans. The Company’s segments include U.S. dialysis and related lab services, DMG, and Other-Ancillary services and strategic initiatives. Its U.S. dialysis and related lab services line of business provide kidney dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). In addition, as of December 31, 2016, the Company operated or provided administrative services to 154 outpatient dialysis centers serving patients located in 11 countries outside of the United States.

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVA – March 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 $8,919,039,746 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 17.39% Fail
6. Moderate PEmg Ratio PEmg < 20 18.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.29 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 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.94
MG Growth Estimate 3.21%
MG Value $43.95
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $42.70
MG Value based on 0% Growth $25.03
Market Implied Growth Rate 4.87%
Current Price $53.74
% of Intrinsic Value 122.29%

Davita Inc 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 poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. 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 $2.43 in 2015 to an estimated $2.94 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.87% 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 Davita Inc revealed the company was trading above its Graham Number of $45.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.25, which was below the industry average of 53.13, 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 $-40.73.

Davita Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$40.73
Graham Number $45.04
PEmg 18.25
Current Ratio 1.72
PB Ratio 2.29
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,424,159,000
Total Current Liabilities $4,891,161,000
Long-Term Debt $8,172,847,000
Total Assets $19,110,252,000
Intangible Assets $6,960,806,000
Total Liabilities $15,201,854,000
Shares Outstanding (Diluted Average) 166,413,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2018 $0.92
Dec2017 $3.47
Dec2016 $4.29
Dec2015 $1.25
Dec2014 $3.33
Dec2013 $2.95
Dec2012 $2.74
Dec2011 $2.48
Dec2010 $1.97
Dec2009 $2.03
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $1.10
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.61
Dec2001 $0.48
Dec2000 $0.05
Dec1999 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.94
Dec2018 $2.48
Dec2017 $3.19
Dec2016 $3.01
Dec2015 $2.43
Dec2014 $2.91
Dec2013 $2.61
Dec2012 $2.36
Dec2011 $2.11
Dec2010 $1.88
Dec2009 $1.76
Dec2008 $1.55
Dec2007 $1.37
Dec2006 $1.11
Dec2005 $0.92
Dec2004 $0.76
Dec2003 $0.48

Recommended Reading:

Other ModernGraham posts about the company

DaVita Inc Valuation – June 2018 $DVA
Davita Inc Valuation – February 2017 $DVA
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
30 Companies in the Spotlight This Week – 11/15/14
DaVita Healthcare Partners Inc. Annual Valuation – 2014 $DVA

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Becton Dickinson and Co Valuation – February 2019 $BDX

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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