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CareFusion Corporation Message Board

  • investora2z investora2z Jul 4, 2013 7:33 AM Flag

    Good potential

    The stock has done well over the last one year with 46% appreciation despite a minor correction from the recent high. It has appreciated 56% from the 52 week low made in August. The earnings in the last quarter were mixed with decline in revenues and a good growth in net income on a yoy basis. Sequentially, there were declines in both revenue and net income. Despite this, the stock has remained reasonably strong and managed to hover around the top even in a volatile environment. This is perhaps because the guidance for EPS for FY13 was increased from $1.92 - $2.02 to $2.11 -$2.21. The guidance for operating margins was also upped from 18-18.5% to 19.5-20%. This is an improvement from the ttm operating margins of around 17.32%. The total revenue is expected to grow between 1-3% in fiscal 2013. The company is anticipating 12-14% CAGR till fiscal 2015. The valuations are a little stretched with trailing P/E above 22 and forward P/E around 16. The PEG is reasonable at 1.55 indicating reasonable growth expectations. The debt has increased over the years and presently it is $1.45 billion. However, the cash on March 31 was $1.9 billion which indicates good liquidity position (current ratio of ~5.56). Considering this, the stock has got potential of modest growth over the next few years. The growth rate for revenue needs to increase to help build more momentum. US is the biggest market with 78% of the sales coming from here. Innovative products are important for helping provide cost efficient care. Even smaller medical device companies like PLC Systems (PLCSF) are doing well with their proprietary technology products. Carefusion has several new and enhanced products in its pipeline at various stages of development. It is also expanding operations outside US to bolster growth, and concentrating on operational efficiencies to expand margins. If it gets it right, the stock can do even better.

 
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