Agilent Technologies (A) stock climbed 1.7 % this morning. According to our metrics, the company seems overvalued at today's prices. In the below analysis, we will put Agilent Technologies's valuation in the context of its strong growth indicators and mixed market sentiment, which are also strong drivers for share price.
Agilent Technologies, Inc. provides application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. The large-cap Industrials company is based in Santa Clara, United States and has 18,400 full time employees.
A Has a Higher P/E Ratio Than the Sector Average
Compared to the Industrials sector's average of 20.49, Agilent Technologies has a trailing twelve month price to earnings (P/E) ratio of 27.0 and an expected P/E ratio of 19.7. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $4.46 or forward earnings per share of $6.12.
Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Agilent Technologies's P/E ratio is higher than its sector average of 20.49, we can deduce that the market is overvaluing the company's earnings.
Agilent Technologies Is Fairly Valued in Terms of Expected Growth
Another factor pointing to Agilent Technologies's value is its PEG ratio of 1.77. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.
A Has an Alarming P/B Ratio
The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.
Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Agilent Technologies's P/B ratio of 6.16 is higher than its sector average of 3.78, such a margin of safety does not exist for the stock.
A Is Generating Cash
Agilent Technologies has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of 6.5%, compared to 16.9% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of 4.2% and a coefficient of variability of 22.1%:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cashflow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-10-31 | 1,312,000 | -291,000 | 1,021,000 | -21.22 |
| 2021-10-31 | 1,485,000 | -189,000 | 1,296,000 | 61.6 |
| 2020-10-31 | 921,000 | -119,000 | 802,000 | -7.28 |
| 2019-10-31 | 1,021,000 | -156,000 | 865,000 | n/a |
Agilent Technologies's Margins Are Strong
If you buy a stock for the long run, you want the underlying business model to be profitable. Gross margins tell you how much profit the company generates compared to the cost of revenue, which is the cost directly related to providing Agilent Technologies's goods and services. Operating margins, on the other hand, tell you how much of these profits the company keeps after you take overhead into account.
Agilent Technologies's Gross Margins
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-10-31 | 6,848,000 | 3,126,000 | 54.35 | 0.8 |
| 2021-10-31 | 6,319,000 | 2,912,000 | 53.92 | 1.47 |
| 2020-10-31 | 5,339,000 | 2,502,000 | 53.14 | -2.19 |
| 2019-10-31 | 5,163,000 | 2,358,000 | 54.33 | n/a |
Agilent Technologies's Operating Margins
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-10-31 | 6,848,000 | 2,104,000 | 23.63 | 10.83 |
| 2021-10-31 | 6,319,000 | 2,060,000 | 21.32 | 34.51 |
| 2020-10-31 | 5,339,000 | 1,991,000 | 15.85 | -13.06 |
| 2019-10-31 | 5,163,000 | 1,864,000 | 18.23 | n/a |
Agilent Technologies's cost of revenue is growing at a rate of 7.3% in contrast to 3.1% for operating expenses. Sales revenues, on the other hand, have experienced a 7.3% growth rate. As a result, the average gross margins growth is 0.0 and the average operating margins growth rate is 6.7, with coefficients of variability of 1.0% and 17.3% respectively.
We See Mixed Market Signals Regarding A
Agilent Technologies has an average rating of buy and target prices ranging from $170.0 to $126.0. At its current price of $120.6, the company is trading -17.29% away from its target price of $145.81. 2.0% of the company's shares are linked to short positions, and 90.4% of the shares are owned by institutional investors.
| Date Reported | Holder | Percentage | Shares | Value |
|---|---|---|---|---|
| 2023-03-31 | Blackrock Inc. | 11% | 31,503,525 | $3,799,325,066 |
| 2023-03-31 | Vanguard Group, Inc. (The) | 9% | 25,473,990 | $3,072,163,155 |
| 2023-03-31 | State Street Corporation | 4% | 12,960,866 | $1,563,080,419 |
| 2023-03-31 | Wellington Management Group, LLP | 4% | 12,056,711 | $1,454,039,328 |
| 2023-03-31 | T. Rowe Price Investment Management, Inc. | 3% | 9,276,541 | $1,118,750,830 |
| 2023-03-31 | Massachusetts Financial Services Co. | 3% | 8,907,103 | $1,074,196,608 |
| 2023-03-31 | Price (T.Rowe) Associates Inc | 3% | 8,218,926 | $991,202,463 |
| 2023-03-31 | Geode Capital Management, LLC | 2% | 6,203,779 | $748,175,737 |
| 2023-03-31 | Pictet Asset Management SA | 2% | 5,285,453 | $637,425,623 |
| 2023-03-31 | Invesco Ltd. | 2% | 4,555,743 | $549,422,598 |
