Agilent Technologies Stock Is Skyrocketing - Is It Too Hot to Handle?

Shares of Agilent Technologies (A) jumped 0.2 % during today's morning session, bringing their 52 week performance to -12.0%. The stock seems to be overvalued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's mixed growth prospects and mixed market sentiment.

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 18,300 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 29.6 and an expected P/E ratio of 19.8. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $3.82 or forward earnings per share of $5.71.

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 Overvalued in Terms of Expected Growth

Agilent Technologies's PEG ratio is 2.62. This metric represents the company's earnings per share divided by its expected growth ratio, and is a useful complement to the price to earnings analysis, because it factors in growth to the valuation. A PEG ratio around or below 1 implies that the market in fairly valuing the company in terms of its growth estimates. But when the PEG ratio is higher, as in Agilent Technologies's case, it tells us the company is overvalued.

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 5.95 is higher than its sector average of 3.78, such a margin of safety does not exist for the stock.

A's Weak Cash Flow Generation Is Troubling

The table below shows that Agilent Technologies is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Agilent Technologies's case, free cash flow is growing at an average rate of 0.0% with a coefficient of variability of 2872420268.0%. We can also see that cash flows from operations are evolving at a 0.0% rate, versus 0.0%:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2022-12-21 1,312,000 -291,000 1,603,000 -4.13
2021-12-17 1,485,000 -187,000 1,672,000 60.92
2020-12-18 921,000 -118,000 1,039,000 -11.65
2019-12-19 1,021,000 -155,000 1,176,000 -6.89
2018-12-20 1,087,000 -176,000 1,263,000 18.59
2017-12-21 889,000 -176,000 1,065,000

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 (%)
2022-12-21 6,848,000 -3,126,000 54 0.0
2021-12-17 6,319,000 -2,912,000 54 1.89
2020-12-18 5,339,000 -2,502,000 53 -1.85
2019-12-19 5,163,000 -2,358,000 54 -1.82
2018-12-20 4,914,000 -2,234,000 55 1.85
2017-12-21 4,472,000 -2,063,000 54

Agilent Technologies's Operating Margins

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2022-12-21 6,848,000 -2,104,000 24 14.29
2021-12-17 6,319,000 -2,060,000 21 31.25
2020-12-18 5,339,000 -1,991,000 16 -11.11
2019-12-19 5,163,000 -1,864,000 18 0.0
2018-12-20 4,914,000 -1,776,000 18 -5.26
2017-12-21 4,472,000 -1,568,000 19

Agilent Technologies's cost of revenue is growing at a rate of -0.0% in contrast to -5.6% for operating expenses. Sales revenues, on the other hand, have experienced a 0.0% growth rate. As a result, the average gross margins growth is 0.1 and the average operating margins growth rate is 3.7, with coefficients of variability of 1.2% and 14.5% respectively.

Agilent Technologies Benefits From Positive Market Signals

The market sentiment regarding Agilent Technologies is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $163.0 to $110.0. A is trading -18.81% away from its target price of $139.13. 1.6% of the company's shares are tied to short positions, and 91.5% of the shares are held by institutional investors.

Date Reported Holder Percentage Shares Value
2023-06-30 Blackrock Inc. 11% 31,853,176 $3,598,134,731
2023-06-30 Vanguard Group Inc 9% 25,199,676 $2,846,555,377
2023-06-30 State Street Corporation 5% 13,214,595 $1,492,720,639
2023-06-30 Massachusetts Financial Services Co. 4% 11,037,240 $1,246,766,620
2023-06-30 T. Rowe Price Investment Management, Inc. 3% 9,967,550 $1,125,934,438
2023-06-30 Wellington Management Group, LLP 3% 8,736,392 $986,862,832
2023-06-30 Price (T.Rowe) Associates Inc 3% 8,053,975 $909,777,008
2023-06-30 Pictet Asset Management SA 2% 6,644,015 $750,507,928
2023-06-30 Geode Capital Management, LLC 2% 6,378,218 $720,483,499
2023-06-30 Morgan Stanley 2% 4,793,914 $541,520,521
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.