PerkinElmer Stock Shows Every Sign Of Being Fairly Valued
- By GF Value
The stock of PerkinElmer (NYSE:PKI, 30-year Financials) appears to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $136.57 per share and the market cap of $15.3 billion, PerkinElmer stock appears to be fairly valued. GF Value for PerkinElmer is shown in the chart below.
Because PerkinElmer is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 18.3% over the past five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. PerkinElmer has a cash-to-debt ratio of 0.18, which which ranks in the bottom 10% of the companies in the industry of Medical Diagnostics & Research. The overall financial strength of PerkinElmer is 5 out of 10, which indicates that the financial strength of PerkinElmer is fair. This is the debt and cash of PerkinElmer over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. PerkinElmer has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $3.8 billion and earnings of $6.48 a share. Its operating margin is 26.08%, which ranks better than 87% of the companies in the industry of Medical Diagnostics & Research. Overall, GuruFocus ranks the profitability of PerkinElmer at 8 out of 10, which indicates strong profitability. This is the revenue and net income of PerkinElmer over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of PerkinElmer is 18.3%, which ranks better than 73% of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth rate is 38.7%, which ranks better than 80% of the companies in the industry of Medical Diagnostics & Research.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, PerkinElmer's return on invested capital is 13.47, and its cost of capital is 7.36. The historical ROIC vs WACC comparison of PerkinElmer is shown below:
To conclude, the stock of PerkinElmer (NYSE:PKI, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 80% of the companies in the industry of Medical Diagnostics & Research. To learn more about PerkinElmer stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
