We've been asking ourselves recently if the market has placed a fair valuation on Baxter International. Let's dive into some of the fundamental values of this Large-Cap Health Care company to determine if there might be an opportunity here for value-minded investors.
Baxter International's Valuation Is in Line With Its Sector Averages:
Baxter International Inc., through its subsidiaries, provides a portfolio of healthcare products in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 22.94 and an average price to book (P/B) ratio of 3.19. In contrast, Baxter International has a trailing 12 month P/E ratio of 82.8 and a P/B ratio of 1.58.
Baxter International has moved -38.3% over the last year compared to 18.6% for the S&P 500 — a difference of -56.9%. Baxter International has a 52 week high of $40.49 and a 52 week low of $21.33.
The Company's Revenues Are Declining:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $11,362 | $11,673 | $12,146 | $10,057 | $10,360 | $10,636 |
| Gross Margins | 42% | 39% | 39% | 35% | 40% | 37% |
| Net Margins | 9% | 9% | 11% | -24% | 26% | -6% |
| Net Income (M) | $1,001 | $1,102 | $1,284 | -$2,433 | $2,656 | -$649 |
| Net Interest Expense (M) | -$71 | -$134 | -$193 | -$395 | -$442 | -$341 |
| Depreciation & Amort. (M) | $789 | $823 | $867 | $1,072 | $984 | $259 |
| Diluted Shares (M) | 519 | 517 | 508 | 504 | 508 | 510 |
| Earnings Per Share | $1.93 | $2.13 | $2.53 | -$4.83 | $5.23 | -$1.27 |
| EPS Growth | n/a | 10.36% | 18.78% | -290.91% | 208.28% | -124.28% |
| Avg. Price | $74.89 | $79.88 | $77.58 | $75.43 | $35.99 | $21.76 |
| P/E Ratio | 38.02 | 36.81 | 30.3 | -15.62 | 6.86 | -17.13 |
| Free Cash Flow (M) | $1,408 | $1,159 | $1,531 | $834 | $1,294 | $573 |
| CAPEX (M) | $696 | $709 | $691 | $377 | $432 | $446 |
| EV / EBITDA | 15.69 | 17.81 | 24.45 | -30.5 | 18.69 | 84.59 |
| Total Debt (M) | $5,124 | $6,639 | $17,964 | $17,807 | $16,523 | $13,806 |
| Net Debt / EBITDA | 0.7 | 1.19 | 6.77 | -9.13 | 7.95 | 44.11 |
| Current Ratio | 2.32 | 2.52 | 2.09 | 1.69 | 1.48 | 1.36 |
Baxter International suffers from declining revenues and decreasing reinvestment in the business, slimmer gross margins than its peers, and declining EPS growth. The firm's financial statements also exhibit positive cash flows and a highly leveraged balance sheet. Baxter International has just enough current assets to cover current liabilities, as shown by its current ratio of 1.36.
