Abbott Laboratories (ABT, Financial) has recently shown a daily gain of 1.35%, yet over the past three months, the stock has experienced a 7.99% loss. With an Earnings Per Share (EPS) of $2.94, investors are keen to understand whether the stock is fairly valued. This article delves into a valuation analysis to address this pressing question and invites readers to explore the intricate details of Abbott Laboratories' market valuation.
Company Introduction
Abbott Laboratories (ABT, Financial) is a cornerstone in the healthcare industry, specializing in a wide range of medical devices, nutritional products, diagnostic equipment, and branded generic drugs. With a diverse portfolio that includes pacemakers, stents, diagnostic kits, and nutritional liquids, Abbott Laboratories garners around 60% of its sales from international markets. Currently, the company's stock price stands at $97.08, presenting a critical juncture for investors as it hovers near the GF Value of $106.98—an estimate of its fair value.
Summarize GF Value
The GF Value is a unique measure that calculates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This proprietary metric suggests that Abbott Laboratories (ABT, Financial) is currently fairly valued. The GF Value Line, a visual representation of this fair value, serves as a benchmark for the stock's trading range. If Abbott Laboratories' stock price substantially deviates from this line, it could indicate an overvalued or undervalued status, influencing future returns. At present, with a price of $97.08 per share, the evidence points to a fair valuation for Abbott Laboratories.
Because Abbott Laboratories is fairly valued, the long-term return of its stock is likely to align closely with the rate of its business growth, suggesting a stable investment outlook.
Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Abbott Laboratories' financial strength is assessed through indicators like the cash-to-debt ratio, where it presents a ratio of 0.45. This figure is less favorable compared to 78.04% of its peers in the Medical Devices & Instruments industry. Despite this, GuruFocus gives Abbott Laboratories a financial strength rating of 7 out of 10, suggesting a fair financial condition.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment. Abbott Laboratories has maintained profitability for the last decade, boasting a $40 billion revenue and an EPS of $2.94. Its operating margin of 15.02% ranks higher than 75.78% of its industry counterparts. The company's profitability score is an impressive 9 out of 10, reflecting strong performance.
The growth of a company is integral to its valuation. Abbott Laboratories' 3-year average revenue growth rate surpasses 61.57% of the companies in its industry, while its 3-year average EBITDA growth rate of 16.4% is also commendable, ranking better than 61.71% of its peers.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another method to gauge profitability. Abbott Laboratories' ROIC stands at 9.62, exceeding its WACC of 7.98, indicating value creation for shareholders. The historical comparison of ROIC vs WACC further illustrates the company's efficient capital management.
Conclusion
In conclusion, Abbott Laboratories (ABT, Financial) appears to be fairly valued, with solid financial health and robust profitability. Its growth trajectory positions it favorably within the Medical Devices & Instruments industry. Investors seeking to delve deeper into Abbott Laboratories' financials can explore the 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.
