Shares of laboratory equipment manufacturing giant Agilent Technologies Inc. (A, Financial) experienced one of its best rallies (from about $66 per share to about $75 per share—setting a new historical high) between December 2017 and January 2018. Yet in early February, the stock tumbled to a new three-month low of $65 per share.
This rate of volatility has been replicated throughout the first half of 2018 and it remains to be seen whether Agilent Technologies’ stock can establish stability going into the second half of the year. But if the current volatility continues over the next several months, shareholders can expect a rebound soon, given the current price of the stock.
From a technical perspective, shares of Agilent appear to be trading within a downward sloping channel, characterized by a series of lower highs and lower lows. The stock recently traded just below $60 per share, but has since made a slight recovery. If the recovery follows the same pattern as the previous rebounds, it could be some time before the next pullback occurs. This could provide an interesting trading opportunity for short-term investors.
Furthermore, looking at the company’s historical price-sales ratio compared to the current price-sales ratio of 4.2 times, it is possible that shares are priced at a relatively cheaper valuation multiple, which could provide investors with more impetus to buy.
Fundamentally, Agilent Technologies has not been doing well recently. Its revenues and earnings have dipped since 2013 and only started registering some notable growth two years ago.
The company has optimistically projected continuous growth in revenue and earnings through 2018, which could help boost its struggling performance in the stock market by the end of the year.
In addition, Agilent has been investing heavily as it seeks to diversify its business and expand globally. According to recent reports, the company has demonstrated its intent to rubberstamp its footprint in the logistic market by announcing a new logistics center in Shanghai. Agilent wants to use the new outlet in a bid to bolster its consumables and service parts business in China by providing expedited delivery services.
Last month, the company also announced it had entered into a definitive agreement to acquire all the assets of Ultra Scientific, a leading provider of chemical standards and certified reference materials.
The company noted that the acquisition of Ultra Scientific will serve a great purpose in its goal of becoming a complete workflow solutions provider.
"Chemical standards are critical to customers’ analytical laboratory workflows and used to help customers qualify the performance of their methods to validate and quantitate their results,” Mark Doak, president of Agilent’s CrossLab Group, said.
While the two companies have been key partners for several years, this acquisition is likely to yield significant operational synergies. It also gives Agilent direct access to some of the most promising end markets in the environmental sector: food, forensics, pharmaceutical, chemical and energy, as well as academia and government.
But it doesn't stop there. Agilent also completed the acquisitions of Lasergen and Genohm this year. Yesterday, it announced it was expanding its biopharma consumables portfolio with the acquisition of ProZyme, a leading provider of glycan analysis reagents, kits and standards.
These acquisitions, coupled with Agilent's projected revenue growth of 5.5% and earnings of about $2.65 per share for 2018, indicate the company’s top and bottom lines, as well as its growth plan, are on the right track, which should give investors more optimism going into the final two quarters of the year.
In summary, while Agilent Technologies' stock has struggled to match industry performance over the last 12 months (posting about a 3.95% decline versus an average industry growth of about 8.64%), the dip could provide strategic investors with an opportunity to buy the stock for cheap.
Furthermore, the company appears to have made several acquisitions over the same period, which suggests this has been a reinvestment phase that could pay off in the next several years. As such, Agilent Technologies will be interesting to watch, especially given its current price level versus the industry.
Disclosure: I have no positions in the stocks mentioned in the article.
