Agilent Technologies Inc (A, Financial) has experienced a 0% change in its stock price and a -14.69% loss over the past three months. With an Earnings Per Share (EPS) (EPS) of 3.82, the question arises: Is the stock modestly undervalued? This article aims to answer that question through a detailed valuation analysis.
An Introduction to Agilent Technologies
Agilent Technologies Inc (A, Financial), originally spun out of Hewlett-Packard in 1999, has evolved into a leading life sciences and diagnostics firm. With operations in the U.S. and China, the company serves a broad base of customers in various sectors. At a current price of $107.53 per share and a market cap of $31.50 billion, Agilent Technologies appears to be modestly undervalued when compared to its GF Value of $152.28. The following sections delve deeper into this valuation.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
For Agilent Technologies (A, Financial), the GF Value suggests that the stock is modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before buying shares. Agilent Technologies has a cash-to-debt ratio of 0.48, ranking lower than 67.26% of companies in the Medical Diagnostics & Research industry. Based on this, GuruFocus ranks Agilent Technologies's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. Agilent Technologies has been profitable for 10 out of the past 10 years. With revenues of $7 billion and an EPS of $3.82 in the past 12 months, its operating margin of 20.2% is better than 85.9% of companies in its industry. GuruFocus ranks Agilent Technologies's profitability as strong.
Growth is one of the most important factors in the valuation of a company. Agilent Technologies' average annual revenue growth is 12%, ranking better than 52.74% of companies in its industry. The 3-year average EBITDA growth is 17.9%, ranking better than 60% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. In the past 12 months, Agilent Technologies's ROIC was 13.47, while its WACC was 10.82.
Conclusion
In conclusion, the stock of Agilent Technologies (A, Financial) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 60% of companies in the Medical Diagnostics & Research industry. To learn more about Agilent Technologies stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
