We've been asking ourselves recently if the market has placed a fair valuation on Agilent Technologies. Let's dive into some of the fundamental values of this large-cap Industrials company to determine if there might be an opportunity here for value-minded investors.
The Market May Be Overvaluing Agilent Technologies's Earnings and Assets:
Agilent Technologies, Inc. provides application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Agilent Technologies has a trailing 12 month P/E ratio of 28.3 and a P/B ratio of 6.54.
Agilent Technologies's PEG ratio is 2.14, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With Increasing Reinvestment in the Business:
| 2019-12-19 | 2020-12-18 | 2021-12-17 | 2022-12-21 | |
|---|---|---|---|---|
| Revenue (MM) | $5,163 | $5,339 | $6,319 | $6,848 |
| Gross Margins | 54.3% | 53.1% | 53.9% | 54.4% |
| Operating Margins | 18.2% | 15.8% | 21.3% | 23.6% |
| Net Margins | 20.74% | 13.47% | 19.15% | 18.31% |
| Net Income (MM) | $1,071 | $719 | $1,210 | $1,254 |
| Net Interest Expense (MM) | -$38 | -$70 | -$79 | -$75 |
| Depreciation & Amort. (MM) | -$238 | -$308 | -$321 | -$317 |
| Earnings Per Share | $3.37 | $2.3 | $3.94 | $4.53 |
| EPS Growth | n/a | -31.75% | 71.3% | 14.97% |
| Diluted Shares (MM) | 318 | 312 | 307 | 295 |
| Free Cash Flow (MM) | $1,176 | $1,039 | $1,672 | $1,603 |
| Capital Expenditures (MM) | -$155 | -$118 | -$187 | -$291 |
| Net Current Assets (MM) | -$1,515 | -$1,339 | -$1,517 | -$1,449 |
| Current Ratio | 1.53 | 2.33 | 2.22 | 2.03 |
| Long Term Debt (MM) | $1,791 | $2,284 | $2,729 | $2,733 |
| Net Debt / EBITDA | 0.68 | 0.94 | n/a | 1.23 |
Agilent Technologies benefits from growing revenues and increasing reinvestment in the business, strong margins with a positive growth rate, and positive EPS growth. The company's financial statements show consistent free cash flow and healthy leverage. However, the firm has slimmer gross margins than its peers. Finally, we note that Agilent Technologies has a decent current ratio.
