On August 4, 2023, Bio-Rad Laboratories Inc (BIO, Financial) saw a daily gain of 3.5%, despite a reported Loss Per Share of 6.54. This prompts an important question: Is the stock significantly undervalued? By delving into the company's GF Value, we provide an insightful valuation analysis. Let's uncover the financial intricacies of Bio-Rad Laboratories (BIO).
Company Overview: Bio-Rad Laboratories Inc (BIO, Financial)
Headquartered in Hercules, California, Bio-Rad Laboratories Inc is a leading player in the clinical diagnostics and life sciences markets. The company develops, manufactures, and markets products and solutions for clinical laboratories, research, biopharmaceutical production, and food testing. With a diversified geographical presence, Bio-Rad Laboratories has substantial markets in the Americas, Europe and Africa, and Asia-Pacific. The company also holds a 37% stake in Sartorius AG, a prominent laboratory and biopharmaceutical supplier.
Despite its current share price of $415.87 and a market cap of $12 billion, the GF Value estimates Bio-Rad Laboratories' fair value at $613.78, suggesting that the stock is significantly undervalued. Let's take a closer look at the company's financials.
Understanding the GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair value at which the stock should ideally be traded. If the stock price significantly deviates above the GF Value Line, it is overvalued, indicating poor future returns. Conversely, if it is significantly below the GF Value Line, its future return is likely to be higher.
Our analysis suggests that Bio-Rad Laboratories (BIO, Financial) is significantly undervalued. As the stock is trading below its GF Value Line, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of Bio-Rad Laboratories
Investing in companies with low financial strength can result in permanent capital loss. Therefore, a careful review of a company's financial strength is crucial before deciding to buy shares. Bio-Rad Laboratories has a cash-to-debt ratio of 1.34, which ranks worse than 60.42% of companies in the Medical Devices & Instruments industry. Based on this, GuruFocus ranks Bio-Rad Laboratories's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Bio-Rad Laboratories has been profitable 9 times over the past 10 years. Over the past twelve months, the company had a revenue of $2.8 billion and Loss Per Share of $6.54. Its operating margin is 14.16%, which ranks better than 73.18% of companies in the Medical Devices & Instruments industry. Overall, the profitability of Bio-Rad Laboratories is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Bio-Rad Laboratories is 7.1%, which ranks worse than 50.62% of companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, the company is creating value for shareholders. Over the past 12 months, Bio-Rad Laboratories's ROIC was 2.73, while its WACC came in at 8.41.
Conclusion
In summary, the stock of Bio-Rad Laboratories Inc (BIO, Financial) is estimated to be significantly undervalued. The company's financial condition and profitability are fair, but its growth ranks worse than 0% of companies in the Medical Devices & Instruments industry. To learn more about Bio-Rad Laboratories stock, you can check out its 30-Year Financials here.
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