Intrinsic value of Agilent Technologies - A

Previous Close

$61.25

  Intrinsic Value

$70.76

stock screener

  Rating & Target

hold

+16%

  Value-price divergence*

+69%

Previous close

$61.25

 
Intrinsic value

$70.76

 
Up/down potential

+16%

 
Rating

hold

 
Value-price divergence*

+69%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 19.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.06
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  4,202
  4,542
  4,896
  5,264
  5,646
  6,043
  6,456
  6,885
  7,332
  7,796
  8,279
  8,783
  9,307
  9,854
  10,425
  11,020
  11,641
  12,290
  12,968
  13,677
  14,418
  15,193
  16,004
  16,854
  17,743
  18,674
  19,649
  20,671
  21,741
  22,864
  24,040
Variable operating expenses, $m
 
  1,946
  2,078
  2,216
  2,358
  2,506
  2,660
  2,821
  2,987
  3,160
  3,341
  3,277
  3,473
  3,677
  3,889
  4,112
  4,343
  4,585
  4,838
  5,103
  5,379
  5,669
  5,971
  6,288
  6,620
  6,967
  7,331
  7,712
  8,112
  8,530
  8,969
Fixed operating expenses, $m
 
  1,857
  1,904
  1,951
  2,000
  2,050
  2,101
  2,154
  2,208
  2,263
  2,320
  2,378
  2,437
  2,498
  2,560
  2,624
  2,690
  2,757
  2,826
  2,897
  2,969
  3,043
  3,119
  3,197
  3,277
  3,359
  3,443
  3,529
  3,618
  3,708
  3,801
Total operating expenses, $m
  3,587
  3,803
  3,982
  4,167
  4,358
  4,556
  4,761
  4,975
  5,195
  5,423
  5,661
  5,655
  5,910
  6,175
  6,449
  6,736
  7,033
  7,342
  7,664
  8,000
  8,348
  8,712
  9,090
  9,485
  9,897
  10,326
  10,774
  11,241
  11,730
  12,238
  12,770
Operating income, $m
  615
  739
  914
  1,097
  1,288
  1,487
  1,694
  1,911
  2,137
  2,373
  2,619
  3,128
  3,398
  3,680
  3,975
  4,284
  4,608
  4,947
  5,304
  5,677
  6,069
  6,481
  6,914
  7,368
  7,845
  8,347
  8,874
  9,429
  10,012
  10,625
  11,270
EBITDA, $m
  861
  1,051
  1,231
  1,419
  1,615
  1,819
  2,033
  2,255
  2,487
  2,729
  2,982
  3,246
  3,523
  3,812
  4,115
  4,432
  4,764
  5,112
  5,478
  5,861
  6,263
  6,685
  7,128
  7,594
  8,083
  8,598
  9,138
  9,706
  10,304
  10,932
  11,592
Interest expense (income), $m
  73
  78
  90
  102
  115
  128
  142
  156
  171
  187
  203
  219
  237
  255
  274
  294
  314
  336
  358
  382
  407
  432
  459
  487
  517
  547
  580
  613
  649
  686
  725
Earnings before tax, $m
  544
  661
  824
  995
  1,173
  1,359
  1,552
  1,755
  1,966
  2,186
  2,416
  2,909
  3,161
  3,425
  3,701
  3,990
  4,294
  4,612
  4,945
  5,295
  5,663
  6,049
  6,455
  6,881
  7,329
  7,800
  8,295
  8,815
  9,363
  9,939
  10,545
Tax expense, $m
  82
  178
  223
  269
  317
  367
  419
  474
  531
  590
  652
  785
  853
  925
  999
  1,077
  1,159
  1,245
  1,335
  1,430
  1,529
  1,633
  1,743
  1,858
  1,979
  2,106
  2,240
  2,380
  2,528
  2,684
  2,847
Net income, $m
  462
  482
  602
  726
  856
  992
  1,133
  1,281
  1,435
  1,596
  1,764
  2,124
  2,308
  2,500
  2,702
  2,913
  3,134
  3,366
  3,610
  3,866
  4,134
  4,416
  4,712
  5,023
  5,350
  5,694
  6,055
  6,435
  6,835
  7,256
  7,698

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,289
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,794
  5,953
  6,417
  6,899
  7,400
  7,920
  8,461
  9,024
  9,609
  10,218
  10,851
  11,511
  12,199
  12,915
  13,663
  14,443
  15,257
  16,108
  16,996
  17,925
  18,896
  19,913
  20,976
  22,089
  23,254
  24,474
  25,752
  27,091
  28,495
  29,966
  31,508
Adjusted assets (=assets-cash), $m
  5,505
  5,953
  6,417
  6,899
  7,400
  7,920
  8,461
  9,024
  9,609
  10,218
  10,851
  11,511
  12,199
  12,915
  13,663
  14,443
  15,257
  16,108
  16,996
  17,925
  18,896
  19,913
  20,976
  22,089
  23,254
  24,474
  25,752
  27,091
  28,495
  29,966
  31,508
Revenue / Adjusted assets
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
Average production assets, $m
  729
  786
  847
  911
  977
  1,045
  1,117
  1,191
  1,268
  1,349
  1,432
  1,519
  1,610
  1,705
  1,803
  1,906
  2,014
  2,126
  2,243
  2,366
  2,494
  2,628
  2,769
  2,916
  3,069
  3,231
  3,399
  3,576
  3,761
  3,955
  4,159
Working capital, $m
  2,690
  432
  465
  500
  536
  574
  613
  654
  696
  741
  787
  834
  884
  936
  990
  1,047
  1,106
  1,168
  1,232
  1,299
  1,370
  1,443
  1,520
  1,601
  1,686
  1,774
  1,867
  1,964
  2,065
  2,172
  2,284
Total debt, $m
  1,904
  2,193
  2,492
  2,803
  3,126
  3,462
  3,811
  4,173
  4,551
  4,943
  5,352
  5,778
  6,221
  6,683
  7,165
  7,669
  8,194
  8,742
  9,316
  9,915
  10,541
  11,197
  11,882
  12,600
  13,352
  14,139
  14,963
  15,827
  16,732
  17,681
  18,675
Total liabilities, $m
  3,551
  3,840
  4,139
  4,450
  4,773
  5,109
  5,458
  5,820
  6,198
  6,590
  6,999
  7,425
  7,868
  8,330
  8,812
  9,316
  9,841
  10,389
  10,963
  11,562
  12,188
  12,844
  13,529
  14,247
  14,999
  15,786
  16,610
  17,474
  18,379
  19,328
  20,322
Total equity, $m
  4,243
  2,113
  2,278
  2,449
  2,627
  2,812
  3,004
  3,203
  3,411
  3,627
  3,852
  4,086
  4,330
  4,585
  4,850
  5,127
  5,416
  5,718
  6,034
  6,363
  6,708
  7,069
  7,446
  7,841
  8,255
  8,688
  9,142
  9,617
  10,116
  10,638
  11,185
Total liabilities and equity, $m
  7,794
  5,953
  6,417
  6,899
  7,400
  7,921
  8,462
  9,023
  9,609
  10,217
  10,851
  11,511
  12,198
  12,915
  13,662
  14,443
  15,257
  16,107
  16,997
  17,925
  18,896
  19,913
  20,975
  22,088
  23,254
  24,474
  25,752
  27,091
  28,495
  29,966
  31,507
Debt-to-equity ratio
  0.449
  1.040
  1.090
  1.140
  1.190
  1.230
  1.270
  1.300
  1.330
  1.360
  1.390
  1.410
  1.440
  1.460
  1.480
  1.500
  1.510
  1.530
  1.540
  1.560
  1.570
  1.580
  1.600
  1.610
  1.620
  1.630
  1.640
  1.650
  1.650
  1.660
  1.670
Adjusted equity ratio
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  462
  482
  602
  726
  856
  992
  1,133
  1,281
  1,435
  1,596
  1,764
  2,124
  2,308
  2,500
  2,702
  2,913
  3,134
  3,366
  3,610
  3,866
  4,134
  4,416
  4,712
  5,023
  5,350
  5,694
  6,055
  6,435
  6,835
  7,256
  7,698
Depreciation, amort., depletion, $m
  246
  313
  317
  322
  327
  333
  338
  344
  350
  356
  363
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  215
  226
  238
  250
  264
  277
  292
  307
  322
Funds from operations, $m
  753
  795
  919
  1,048
  1,184
  1,324
  1,471
  1,625
  1,785
  1,952
  2,127
  2,241
  2,432
  2,632
  2,841
  3,061
  3,290
  3,531
  3,784
  4,049
  4,327
  4,620
  4,927
  5,249
  5,588
  5,944
  6,319
  6,713
  7,127
  7,562
  8,020
Change in working capital, $m
  -40
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  74
  77
  81
  84
  88
  93
  97
  102
  107
  112
Cash from operations, $m
  793
  762
  885
  1,014
  1,147
  1,287
  1,432
  1,584
  1,743
  1,908
  2,081
  2,194
  2,383
  2,580
  2,787
  3,004
  3,231
  3,470
  3,719
  3,982
  4,257
  4,546
  4,849
  5,168
  5,503
  5,856
  6,226
  6,615
  7,025
  7,456
  7,909
Maintenance CAPEX, $m
  0
  -56
  -61
  -66
  -71
  -76
  -81
  -87
  -92
  -98
  -105
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -183
  -193
  -204
  -215
  -226
  -238
  -250
  -264
  -277
  -292
  -307
New CAPEX, $m
  -139
  -57
  -61
  -64
  -66
  -69
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -123
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -185
  -194
  -204
Cash from investing activities, $m
  -238
  -113
  -122
  -130
  -137
  -145
  -152
  -161
  -169
  -178
  -189
  -198
  -209
  -220
  -231
  -243
  -255
  -268
  -282
  -297
  -311
  -327
  -344
  -362
  -380
  -399
  -419
  -441
  -462
  -486
  -511
Free cash flow, $m
  555
  649
  763
  884
  1,011
  1,142
  1,280
  1,423
  1,573
  1,729
  1,893
  1,995
  2,174
  2,361
  2,556
  2,761
  2,976
  3,201
  3,437
  3,685
  3,945
  4,218
  4,505
  4,807
  5,124
  5,457
  5,807
  6,175
  6,562
  6,970
  7,398
Issuance/(repayment) of debt, $m
  262
  289
  299
  311
  323
  336
  349
  363
  377
  393
  409
  426
  443
  462
  482
  503
  525
  549
  573
  599
  627
  655
  686
  718
  751
  787
  824
  864
  905
  949
  995
Issuance/(repurchase) of shares, $m
  -372
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -118
  289
  299
  311
  323
  336
  349
  363
  377
  393
  409
  426
  443
  462
  482
  503
  525
  549
  573
  599
  627
  655
  686
  718
  751
  787
  824
  864
  905
  949
  995
Total cash flow (excl. dividends), $m
  436
  938
  1,062
  1,195
  1,334
  1,478
  1,629
  1,786
  1,950
  2,122
  2,301
  2,421
  2,617
  2,823
  3,039
  3,264
  3,501
  3,750
  4,011
  4,284
  4,572
  4,874
  5,191
  5,525
  5,875
  6,244
  6,631
  7,039
  7,468
  7,919
  8,393
Retained Cash Flow (-), $m
  -76
  -159
  -165
  -171
  -178
  -185
  -192
  -200
  -208
  -216
  -225
  -234
  -244
  -254
  -265
  -277
  -289
  -302
  -315
  -330
  -345
  -361
  -377
  -395
  -414
  -433
  -454
  -475
  -498
  -522
  -547
Prev. year cash balance distribution, $m
 
  2,289
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,067
  898
  1,024
  1,156
  1,293
  1,437
  1,586
  1,743
  1,906
  2,076
  2,187
  2,373
  2,569
  2,773
  2,988
  3,212
  3,448
  3,695
  3,955
  4,227
  4,513
  4,814
  5,130
  5,462
  5,811
  6,178
  6,564
  6,969
  7,396
  7,846
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  2,941
  822
  891
  952
  1,002
  1,043
  1,072
  1,089
  1,095
  1,089
  1,038
  1,013
  977
  931
  877
  816
  750
  680
  609
  537
  467
  399
  336
  278
  226
  180
  141
  108
  81
  59
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Agilent Technologies, Inc. provides application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. Its Life Sciences and Applied Markets segment offers liquid chromatography systems and components; liquid chromatography mass spectrometry systems; gas chromatography systems and components; gas chromatography mass spectrometry systems; inductively coupled plasma mass spectrometry instruments; atomic absorption instruments; microwave plasma-atomic emission spectrometry instruments; inductively coupled plasma optical emission spectrometry instruments; laboratory software and informatics systems; laboratory automation and robotic systems; dissolution testing; vacuum pumps; and measurement technologies. The company’s Diagnostics and Genomics segment provides reagents, instruments, software, and consumables; arrays for DNA mutation detection, genotyping, gene copy number determination, identification of gene rearrangements, DNA methylation profiling, and gene expression profiling, as well as sequencing target enrichment services; and equipment focused on production of synthesized oligonucleotides for use as active pharmaceutical ingredients. Its Agilent CrossLab segment offers GC and LC columns, sample preparation products, custom chemistries, and various laboratory instrument supplies; and startup, operational, training, and compliance support, as well as asset management and consultation services. The company markets and sells its products through direct sales, electronic commerce, resellers, manufacturers' representatives, and distributors. It has a collaboration agreement with University of Leuven to focus on detecting genetic abnormalities in cell-free DNA and embryo biopsies. Agilent Technologies, Inc. was founded in 1999 and is headquartered in Santa Clara, California.

FINANCIAL RATIOS  of  Agilent Technologies (A)

Valuation Ratios
P/E Ratio 43
Price to Sales 4.7
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 25
Price to Free Cash Flow 30.3
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.8%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 44.9%
Total Debt to Equity 44.9%
Interest Coverage 8
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 52.3%
Gross Margin - 3 Yr. Avg. 50.5%
EBITDA Margin 20.5%
EBITDA Margin - 3 Yr. Avg. 18.5%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. 11.5%
Effective Tax Rate 15.1%
Eff/ Tax Rate - 3 Yr. Avg. 7.5%
Payout Ratio 32.5%

A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the A stock intrinsic value calculation we used $4202 million for the last fiscal year's total revenue generated by Agilent Technologies. The default revenue input number comes from 2016 income statement of Agilent Technologies. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our A stock valuation model: a) initial revenue growth rate of 8.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for A is calculated based on our internal credit rating of Agilent Technologies, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Agilent Technologies.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of A stock the variable cost ratio is equal to 43.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1812 million in the base year in the intrinsic value calculation for A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Agilent Technologies.

Corporate tax rate of 27% is the nominal tax rate for Agilent Technologies. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for A are equal to 17.3%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Agilent Technologies operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for A is equal to 9.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4243 million for Agilent Technologies - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 319.754 million for Agilent Technologies is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Agilent Technologies at the current share price and the inputted number of shares is $19.6 billion.

Management's discussion and analysis

Agilent Technologies Inc. ("we", "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that includes instruments, software, services and consumables for the entire laboratory workflow.

In November 2015, we completed the acquisition of Seahorse Bioscience ("Seahorse"), a leader in providing instruments and assay kits for measuring cell metabolism and bioenergetics for $242 million in cash. Seahorse's technology enables researchers to better understand cell health, function and signaling, and how the cell may be impacted by the introduction of a specific drug, by providing real-time kinetics to unlock essential cellular bioenergetics data. The financial results of Seahorse have been included within Agilent's consolidated financial statements from November 1, 2015.

On March 2, 2016, Agilent made a preferred stock investment in Lasergen for $80 million. Agilent’s initial ownership stake was 48 percent and we have also joined the board of Lasergen and signed a collaboration agreement. We have the option to acquire all of the remaining shares of Lasergen until March 2, 2018, for additional consideration of $105 million. Lasergen is a Variable Interest Entity (“VIE”), however, we do not consolidate the entity in our financial statements because we do not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance nor are we the primary beneficiary. Because of the nature of the preferred stock of Lasergen that we own, we account for this investment under the cost method.

On August 1, 2016 we completed the acquisition of substantially all of the assets of iLab Solutions LLC ("iLab"), a cloud-based solutions provider for core laboratory management.  iLab's offerings enables customers to easily and accurately book time in shared facilities, to bill and invoice for projects, to manage studies, to generate reports and business intelligence, and to schedule instrument reservations across multiple projects. The purchase price was $26 million in cash. The financial results of iLab have been included within Agilent's consolidated financial statements from August 1, 2016.

Agilent's net revenue of $4,202 million in 2016 increased 4 percent when compared to 2015. Foreign currency movements for 2016 had an unfavorable impact of approximately 2 percentage points compared to 2015. Agilent's net revenue of $4,038 million was flat in 2015 when compared to 2014.

The life sciences and applied markets business brings together Agilent's analytical laboratory instrumentation and informatics. Revenue increased 1 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 2 percentage points in 2016 when compared to 2015. For the year ended October 31, 2016 and excluding the impact of foreign currency movements, acquisitions and the NMR business our performance within the life sciences market continued to show strong revenue growth from the pharmaceutical and biotechnology markets. Within the applied markets, and excluding the impact of foreign currency movements and the NMR business, there was strong growth in both the environmental and food markets, but revenue from sales to other applied markets was weak with a decline in revenue from sales to the chemical and energy markets. Revenue decreased 2 percent in 2015 when compared to 2014. For the year ended October 31, 2015 and 

excluding the impact of currency movements and the NMR business, our performance within the life sciences business showed consistent revenue growth from sales to the pharmaceutical and biotechnology market partially offset by a decrease in the revenue generated from sales to the life sciences research market. Within applied markets and excluding the impact of currency movements and the NMR business, there was weakness in the chemical and energy markets in the year ended October 31, 2015 when compared to the prior year.

The diagnostics and genomics business includes genomics, nucleic acid contract manufacturing and the pathology, companion diagnostics and reagent partnership businesses. Revenue increased 7 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 1 percentage points in 2016 when compared to 2015. Excluding the impact of foreign currency movements and acquisitions, growth in revenue from sales to the diagnostics and clinical markets continued to be strong, led by our companion diagnostics and genomics businesses in the year ended October 31, 2016 when compared to the prior year. Revenue was flat in 2015 when compared to 2014. Excluding foreign currency movements, our growth in revenue from sales to the diagnostics and clinical markets was strong in the year ended October 31, 2015 when compared to the prior year.

The Agilent CrossLab business combines our analytical laboratory services and consumables business. Revenue increased 7 percent in 2016 when compared to 2015. Foreign currency movements had an unfavorable impact of approximately 2 percentage points in 2016 when compared to 2015. Excluding the impact of foreign currency movements and acquisitions, there was growth in sales to all key markets. The pharmaceutical and biotechnology markets led all the markets in revenue and revenue growth along with very strong revenue growth from the food markets. In addition, we saw moderate growth from the environmental market and modest revenue growth from the chemical and energy markets. Revenue increased 2 percent in 2015 when compared to 2014. Excluding the impact of foreign currency movements there was growth in sales to all key end markets, in particular, the pharmaceutical and biotechnology market in the year ended October 31, 2015 when compared to the prior year. Within the applied markets revenue in chemical and energy end markets were slower but still reported growth when adjusted for currency movements.

Net income from continuing operations was $462 million in 2016 compared to net income from continuing operations of $438 million and $232 millionin 2015 and 2014, respectively. As of October 31, 2016 and 2015 we had cash and cash equivalents balances of $2,289 million and $2,003 million, respectively.

On November 22, 2013 we announced that our board of directors had authorized a share repurchase program. The existing program is designed to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs to target maintaining a weighted average share count of approximately 335 million diluted shares. For the years ended October 31, 2016, 2015 and 2014 we repurchased 2.4 million shares for $98 million, 6 million shares for $267 million and 4 million shares for $200 million, respectively. All such shares and related costs are held as treasury stock and accounted for using the cost method.

On May 28, 2015 we announced that our board of directors had approved a new share repurchase program (the "2015 repurchase program"). The 2015 share repurchase program authorizes the purchase of up to $1.14 billion of our common stock through and including November 1, 2018. The 2015 repurchase program does not require the company to acquire a specific number of shares and may be suspended or discontinued at any time. During the year ended October 31, 2016, upon the completion of our previous repurchase program, we repurchased approximately 8.3 million shares for $336 million under this authorization. All such shares and related costs are held as treasury stock and accounted for using the cost method.

For the years ended October 31, 2016, 2015 and 2014 cash dividends of $150 million, $133 million and $176 million were paid on the company's outstanding common stock, respectively. On November 16, 2016, we declared a quarterly dividend of $0.132 per share of common stock, or approximately $43 million which will be paid on January 25, 2017 to shareholders of record as of the close of business on January 3, 2017. The timing and amounts of any future dividends are subject to determination and approval by our board of directors.

Looking forward, we expect to continue to focus on the growth of the operating margin in our businesses by simplifying our operations, differentiating product solutions and improving our customer's experience. We anticipate returning a significant proportion of our cash flow to shareholders through our dividend and share repurchase programs. End market growth outlook in today's uncertain political and economic environment is unpredictable and challenging. However, we expect continued strength in the pharmaceutical markets and solid growth in the food and environmental markets but we remain uncertain about the growth in the chemical and energy markets. The unfavorable effects of changes in foreign currency exchange rates has decreased revenue by approximately 2 percentage points for the year ended October 31, 2016. Costs and expenses, incurred in local currency, were subject to the favorable effects due to changes in foreign currency exchange rates reducing our overall net exposure. The impact of foreign currency exchange rates movements can be positive or negative in any period and is calculated by applying the prior period foreign currency exchange rates to the current year period. We anticipate that changes in foreign currency exchange rates will continue to have an unfavorable impact on our performance for the near future.

[Source: Form 10-K dated 2016-12-20]

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Stock chart of A Financial statements of A
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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