Bio-Rad Laboratories Inc. (BIO) is a manufacturer and distributor of its own life science research and clinical diagnostics products. The company has two primary segments: Life Science and Clinical Diagnostics. The company sells its products and services to a diverse client base comprised of scientific research, healthcare, education and government customers.
Let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment.
- John Rogers Stock Picks
- John Rogers Current Portfolio
- This Powerful Chart Made Peter Lynch 29% A Year For 13 Years
Analyst�s Ratings & Recommendations
The Street Ratings upgraded Bio-Rad from hold to buy. The company's strengths are: its revenue growth, largely solid financial position with reasonable debt levels, reasonable valuation levels, expanding profit margins and increase in stock price during the past year.
Moreover, due to the repayment of $300 million of subordinated notes, Moody's Investors Service affirmed the Ba1 Corporate Family Rating and Ba1-PD Probability of Default Rating of the company. Moody's also affirmed the Ba1 rating on the company's senior unsecured notes
Finally, as opposed to what we just discussed, the firm is currently Zacks Rank # 4-Sell, and it also has a longer-term recommendation of "Neutral". A Sell rating indicates that the stock, over the next 1 to 3 months, will perform at an annualized rate of 4.8%, which is not attractive for investors. For investors looking for a Strong Buy Rank, BioLife Solutions, Inc. (BLFS) and Enzymotec Ltd. (ENZY) could be the options.
P/E, Earnings and ROE
In terms of valuation, the stock sells at a trailing P/E of 48.4x, trading at a premium compared to an average of 19.2x for the industry. To use another metric, its price-to-book ratio of 1.7x indicates a premium versus the industry average of 1.49x and the price-to-sales ratio of 1.75x is above the industry average of 0.9x. The metrics indicate that the stock is relatively overvalued relative to its peers.
Earnings per share (EPS) decreased by 31.1% in the most recent quarter compared to the same quarter a year ago, to $1.04 per share for the fourth quarter of 2013. We include in the next graph the stock price because EPS often lead the stock price movement. As we can appreciate in the chart, the price performance makes the stock appealing with an upward trend over the last five years.
Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has increased when compared to the same quarter one year prior. Let�s compare the current ratio with the peer group in the next table:
Thermo Fisher Scientific, Inc.
CVS Caremark Corp
As we can see, the firm has a lower ROE than Abbott Laboratories (ABT), Thermo Fisher Scientific Inc. (TMO) and CVS Caremark Corporation (CVS).
Although, the laboratory had weak growth in earnings per share, we can see that the firm has grown in a relatively good shape in the past times and we expect to continue in the next years.
I would recommend investors to add Bio-Rad Laboratories to their long term portfolios. Hedge fund gurus have also been active in the company in fourth quarter 2013. Gurus like Paul Tudor Jones (Trades, Portfolio), John Rogers (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and NWQ Managers (Trades, Portfolio) have taken long positions in it.
Disclosure: Victor Selva holds no position in any stocks mentioned.This article first appeared on GuruFocus.
- Investment & Company Information
- Bio-Rad Laboratories
- Abbott Laboratories