Intrinsic value of Agilent Technologies, Inc. - A

Previous Close

$68.36

  Intrinsic Value

$46.08

stock screener

  Rating & Target

sell

-33%

Previous close

$68.36

 
Intrinsic value

$46.08

 
Up/down potential

-33%

 
Rating

sell

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 0001), $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 21.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  5,209
  5,516
  5,837
  6,171
  6,520
  6,885
  7,265
  7,663
  8,080
  8,515
  8,970
  9,447
  9,946
  10,469
  11,016
  11,589
  12,190
  12,820
  13,480
  14,173
  14,899
  15,660
  16,458
  17,296
  18,174
  19,096
  20,063
  21,078
  22,143
  23,261
Variable operating expenses, $m
  4,162
  4,387
  4,622
  4,867
  5,122
  5,389
  5,668
  5,960
  6,265
  6,584
  6,571
  6,920
  7,286
  7,668
  8,069
  8,489
  8,930
  9,391
  9,875
  10,382
  10,913
  11,471
  12,056
  12,669
  13,313
  13,988
  14,696
  15,440
  16,220
  17,038
Fixed operating expenses, $m
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  55
  57
  58
  59
  60
  62
  63
  65
  66
  67
  69
  70
  72
  74
  75
  77
Total operating expenses, $m
  4,203
  4,429
  4,665
  4,911
  5,167
  5,435
  5,715
  6,008
  6,314
  6,634
  6,622
  6,972
  7,339
  7,722
  8,124
  8,546
  8,988
  9,450
  9,935
  10,444
  10,976
  11,536
  12,122
  12,736
  13,382
  14,058
  14,768
  15,514
  16,295
  17,115
Operating income, $m
  1,006
  1,087
  1,172
  1,261
  1,353
  1,450
  1,550
  1,656
  1,766
  1,882
  2,349
  2,475
  2,607
  2,746
  2,891
  3,043
  3,203
  3,370
  3,545
  3,729
  3,922
  4,124
  4,336
  4,559
  4,793
  5,038
  5,295
  5,565
  5,848
  6,145
EBITDA, $m
  1,486
  1,575
  1,668
  1,765
  1,866
  1,972
  2,082
  2,198
  2,319
  2,445
  2,578
  2,716
  2,862
  3,013
  3,173
  3,340
  3,514
  3,698
  3,890
  4,091
  4,303
  4,524
  4,757
  5,001
  5,257
  5,526
  5,807
  6,103
  6,414
  6,739
Interest expense (income), $m
  82
  97
  110
  123
  137
  152
  167
  183
  200
  217
  235
  254
  274
  295
  317
  340
  364
  389
  415
  442
  471
  501
  533
  566
  601
  638
  676
  716
  758
  803
  849
Earnings before tax, $m
  909
  977
  1,049
  1,123
  1,201
  1,282
  1,367
  1,456
  1,549
  1,646
  2,094
  2,201
  2,312
  2,429
  2,552
  2,680
  2,814
  2,955
  3,103
  3,258
  3,421
  3,591
  3,770
  3,958
  4,155
  4,362
  4,578
  4,806
  5,045
  5,296
Tax expense, $m
  245
  264
  283
  303
  324
  346
  369
  393
  418
  444
  565
  594
  624
  656
  689
  724
  760
  798
  838
  880
  924
  970
  1,018
  1,069
  1,122
  1,178
  1,236
  1,298
  1,362
  1,430
Net income, $m
  663
  713
  766
  820
  877
  936
  998
  1,063
  1,131
  1,202
  1,529
  1,607
  1,688
  1,773
  1,863
  1,956
  2,054
  2,157
  2,265
  2,378
  2,497
  2,622
  2,752
  2,889
  3,033
  3,184
  3,342
  3,508
  3,683
  3,866

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  7,916
  8,383
  8,870
  9,378
  9,909
  10,463
  11,042
  11,647
  12,279
  12,941
  13,633
  14,357
  15,115
  15,910
  16,742
  17,613
  18,526
  19,484
  20,487
  21,539
  22,642
  23,799
  25,012
  26,285
  27,620
  29,021
  30,491
  32,033
  33,652
  35,350
Adjusted assets (=assets-cash), $m
  7,916
  8,383
  8,870
  9,378
  9,909
  10,463
  11,042
  11,647
  12,279
  12,941
  13,633
  14,357
  15,115
  15,910
  16,742
  17,613
  18,526
  19,484
  20,487
  21,539
  22,642
  23,799
  25,012
  26,285
  27,620
  29,021
  30,491
  32,033
  33,652
  35,350
Revenue / Adjusted assets
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
  0.658
Average production assets, $m
  2,542
  2,692
  2,848
  3,011
  3,182
  3,360
  3,546
  3,740
  3,943
  4,155
  4,377
  4,610
  4,854
  5,109
  5,376
  5,656
  5,949
  6,256
  6,578
  6,916
  7,270
  7,642
  8,032
  8,440
  8,869
  9,319
  9,791
  10,286
  10,806
  11,351
Working capital, $m
  458
  485
  514
  543
  574
  606
  639
  674
  711
  749
  789
  831
  875
  921
  969
  1,020
  1,073
  1,128
  1,186
  1,247
  1,311
  1,378
  1,448
  1,522
  1,599
  1,680
  1,766
  1,855
  1,949
  2,047
Total debt, $m
  2,036
  2,285
  2,544
  2,814
  3,097
  3,391
  3,699
  4,021
  4,357
  4,709
  5,078
  5,463
  5,866
  6,289
  6,731
  7,195
  7,681
  8,190
  8,724
  9,284
  9,871
  10,486
  11,132
  11,809
  12,519
  13,264
  14,046
  14,867
  15,728
  16,631
Total liabilities, $m
  4,211
  4,460
  4,719
  4,989
  5,272
  5,566
  5,874
  6,196
  6,532
  6,884
  7,253
  7,638
  8,041
  8,464
  8,906
  9,370
  9,856
  10,365
  10,899
  11,459
  12,046
  12,661
  13,307
  13,984
  14,694
  15,439
  16,221
  17,042
  17,903
  18,806
Total equity, $m
  3,705
  3,923
  4,151
  4,389
  4,637
  4,897
  5,167
  5,451
  5,747
  6,056
  6,380
  6,719
  7,074
  7,446
  7,835
  8,243
  8,670
  9,118
  9,588
  10,080
  10,597
  11,138
  11,706
  12,301
  12,926
  13,582
  14,270
  14,992
  15,749
  16,544
Total liabilities and equity, $m
  7,916
  8,383
  8,870
  9,378
  9,909
  10,463
  11,041
  11,647
  12,279
  12,940
  13,633
  14,357
  15,115
  15,910
  16,741
  17,613
  18,526
  19,483
  20,487
  21,539
  22,643
  23,799
  25,013
  26,285
  27,620
  29,021
  30,491
  32,034
  33,652
  35,350
Debt-to-equity ratio
  0.550
  0.580
  0.610
  0.640
  0.670
  0.690
  0.720
  0.740
  0.760
  0.780
  0.800
  0.810
  0.830
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
  1.010
Adjusted equity ratio
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  663
  713
  766
  820
  877
  936
  998
  1,063
  1,131
  1,202
  1,529
  1,607
  1,688
  1,773
  1,863
  1,956
  2,054
  2,157
  2,265
  2,378
  2,497
  2,622
  2,752
  2,889
  3,033
  3,184
  3,342
  3,508
  3,683
  3,866
Depreciation, amort., depletion, $m
  479
  487
  496
  504
  513
  522
  532
  542
  553
  564
  229
  241
  254
  267
  281
  296
  311
  328
  344
  362
  381
  400
  421
  442
  464
  488
  513
  539
  566
  594
Funds from operations, $m
  1,143
  1,201
  1,261
  1,324
  1,390
  1,458
  1,530
  1,605
  1,684
  1,766
  1,758
  1,848
  1,942
  2,041
  2,144
  2,252
  2,366
  2,485
  2,610
  2,741
  2,878
  3,022
  3,173
  3,331
  3,497
  3,672
  3,855
  4,047
  4,249
  4,460
Change in working capital, $m
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
Cash from operations, $m
  1,117
  1,174
  1,233
  1,295
  1,359
  1,426
  1,497
  1,570
  1,647
  1,727
  1,718
  1,806
  1,898
  1,995
  2,096
  2,202
  2,313
  2,430
  2,552
  2,680
  2,814
  2,955
  3,102
  3,257
  3,420
  3,591
  3,770
  3,958
  4,155
  4,362
Maintenance CAPEX, $m
  -126
  -133
  -141
  -149
  -158
  -167
  -176
  -186
  -196
  -206
  -218
  -229
  -241
  -254
  -267
  -281
  -296
  -311
  -328
  -344
  -362
  -381
  -400
  -421
  -442
  -464
  -488
  -513
  -539
  -566
New CAPEX, $m
  -144
  -150
  -156
  -163
  -170
  -178
  -186
  -194
  -203
  -212
  -222
  -233
  -244
  -255
  -267
  -280
  -293
  -307
  -322
  -338
  -354
  -371
  -390
  -409
  -429
  -450
  -472
  -495
  -520
  -545
Cash from investing activities, $m
  -270
  -283
  -297
  -312
  -328
  -345
  -362
  -380
  -399
  -418
  -440
  -462
  -485
  -509
  -534
  -561
  -589
  -618
  -650
  -682
  -716
  -752
  -790
  -830
  -871
  -914
  -960
  -1,008
  -1,059
  -1,111
Free cash flow, $m
  847
  891
  936
  982
  1,031
  1,082
  1,135
  1,190
  1,248
  1,309
  1,278
  1,344
  1,413
  1,486
  1,561
  1,641
  1,724
  1,811
  1,902
  1,997
  2,098
  2,203
  2,313
  2,428
  2,549
  2,677
  2,810
  2,950
  3,097
  3,251
Issuance/(repayment) of debt, $m
  237
  248
  259
  270
  282
  295
  308
  322
  336
  352
  368
  385
  403
  423
  443
  464
  486
  509
  534
  560
  587
  615
  646
  677
  710
  745
  782
  820
  861
  904
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  237
  248
  259
  270
  282
  295
  308
  322
  336
  352
  368
  385
  403
  423
  443
  464
  486
  509
  534
  560
  587
  615
  646
  677
  710
  745
  782
  820
  861
  904
Total cash flow (excl. dividends), $m
  1,085
  1,139
  1,195
  1,253
  1,313
  1,377
  1,443
  1,512
  1,585
  1,660
  1,646
  1,730
  1,817
  1,908
  2,004
  2,104
  2,210
  2,320
  2,436
  2,557
  2,684
  2,818
  2,958
  3,105
  3,260
  3,422
  3,592
  3,770
  3,958
  4,154
Retained Cash Flow (-), $m
  -214
  -219
  -228
  -238
  -248
  -259
  -271
  -283
  -296
  -310
  -324
  -339
  -355
  -372
  -389
  -408
  -427
  -448
  -470
  -492
  -516
  -541
  -568
  -596
  -625
  -656
  -688
  -722
  -757
  -795
Prev. year cash balance distribution, $m
  1,076
  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
  1,947
  921
  967
  1,015
  1,065
  1,117
  1,172
  1,229
  1,289
  1,351
  1,322
  1,391
  1,462
  1,537
  1,615
  1,696
  1,782
  1,872
  1,966
  2,065
  2,168
  2,277
  2,390
  2,510
  2,635
  2,766
  2,904
  3,049
  3,200
  3,360
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
  1,866
  843
  841
  836
  826
  811
  792
  768
  740
  708
  628
  593
  556
  516
  474
  431
  388
  345
  303
  262
  224
  189
  157
  128
  103
  81
  62
  47
  35
  25
Current shareholders' claim on cash, %
  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 that include instruments, software, services and consumables for the entire laboratory workflow. The Company serves the life sciences, diagnostics and applied chemical markets. It has three business segments: life sciences and applied markets business, diagnostics and genomics business, and Agilent CrossLab business. Its life sciences and applied markets business segment offers instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular level. Its diagnostics and genomics business segment includes the reagent partnership, pathology, companion diagnostics, genomics and the nucleic acid solutions businesses. Its Agilent CrossLab business segment spans the entire lab with its consumables and services portfolio.

FINANCIAL RATIOS  of  Agilent Technologies, Inc. (A)

Valuation Ratios
P/E Ratio 32.2
Price to Sales 4.9
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 24.8
Price to Free Cash Flow 30.9
Growth Rates
Sales Growth Rate 6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.6%
Cap. Spend. - 3 Yr. Gr. Rate -3%
Financial Strength
Quick Ratio 13
Current Ratio 0.2
LT Debt to Equity 37.3%
Total Debt to Equity 41.6%
Interest Coverage 11
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 10.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8.2%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 11.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53.9%
Gross Margin - 3 Yr. Avg. 52.2%
EBITDA Margin 24.5%
EBITDA Margin - 3 Yr. Avg. 21.7%
Operating Margin 18.8%
Oper. Margin - 3 Yr. Avg. 15.5%
Pre-Tax Margin 18%
Pre-Tax Margin - 3 Yr. Avg. 14.3%
Net Profit Margin 15.3%
Net Profit Margin - 3 Yr. Avg. 12.1%
Effective Tax Rate 14.8%
Eff/ Tax Rate - 3 Yr. Avg. 12.9%
Payout Ratio 24.9%

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 $4914 million for the last fiscal year's total revenue generated by Agilent Technologies, Inc.. The default revenue input number comes from 0001 income statement of Agilent Technologies, Inc.. 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 6% 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, Inc., 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, Inc..
    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 80.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $40 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 5.4% for Agilent Technologies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Agilent Technologies, Inc.. 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 48.8%.

Life of production assets of 19.1 years is the average useful life of capital assets used in Agilent Technologies, Inc. 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 8.8%. 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 - $4567 million for Agilent Technologies, Inc. - 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 317.509 million for Agilent Technologies, Inc. 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, Inc. at the current share price and the inputted number of shares is $21.7 billion.

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