Baxter International (BAX) — Is Today's Drop Justified by Its Fundamentals?

Baxter International logged a -6.1% change during today's morning session, and is now trading at a price of $49.34 per share. The S&P 500 index moved 1.0% and the Nasdaq posted a 0.8% change. BAX's trading volume is 2,578,501 compared to the stock's average volume of 4,589,211.

Baxter International shares moved -39.9% over the last 52 weeks, with a high of $89.7 and a low of $47.86. During this time, the stock lagged the S&P 500 index by -21.3%. As of January 2022, the company's 50-day average price is $52.9374. Baxter International Inc., through its subsidiaries, develops and provides a portfolio of healthcare products worldwide. The large-cap Healthcare company has 60,000 full time employees and is based in Deerfield, IL. Baxter International has returned a 1.9% dividend yield over the last 12 months.

Good EPS Growth with a Highly Leveraged Balance Sheet:

2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $11,362 $11,673 $12,784
Revenue Growth n/a 2.74% 9.52%
Gross Margins 41.9% 39.3% 39.9%
Gross Margins Growth n/a -6.21% 1.53%
Operating Margins 7.7% 13.3% 13.2%
Operating Margins Growth n/a 72.73% -0.75%
Earnings Per Share $1.93 $2.13 $2.53
EPS Growth n/a 10.36% 18.78%
Free Cash Flow (MM) $1,408 $1,159 $1,479
FCF Growth n/a -17.68% 27.61%
Capital Expenditures (MM) -$696 -$709 -$743
Net Debt / EBITDA 1.2 1.07 5.71

Baxter International Is Overpriced:

Compared to the Healthcare sector's average of 13.21, Baxter International has a trailing twelve month price to earnings (P/E) ratio of 24.7 and, based on its EPS guidance of 3.59, an expected P/E ratio of 13.7. The firm's price to earnings growth (PEG) is 3.57, which indicates that it is overvalued in terms of its expected rate of earnings growth.

Baxter International's price to book (P/B) ratio is 4.5 compared to its sector average of 4.07. The company is likley overvalued in terms of its net tangible assets. The company's shares are currently trading 111.6% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 3-year average EPS * book value per share) = √(22.5 * 2.2 * 10.981) = $23.31

Baxter International Is the Subject of Mixed Market Indicators:

14 analysts are following Baxter International and have set target prices ranging from $51 to $73 per share. On average, they have given the company a rating of buy. At the current price of $49.34, BAX is trading -19.13% away from its average analyst target price of $61.01 per share, implying an analyst consensus of some upside potential for the stock.

The company has a very low short interest since 1.3% of the company's shares are tied to short positions. Institutions own 89.4% of Baxter International's shares, while the insider ownership rate stands at 0.2%. The biggest shareholder is Wellington Management Group, LLP with a 12% stake in the company worth approximately $2,910,695,731.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.