Unveiling Bio-Techne (TECH)'s Value: Is It Really Priced Right? A Comprehensive Guide
Today, Bio-Techne Corp (NASDAQ:TECH) experienced a daily loss of 2.26%, contributing to a 3-month loss of 8.53%. Despite these losses, the company posted a noteworthy Earnings Per Share (EPS) of 1.76. With these figures, the burning question is whether the stock is significantly undervalued. This article provides an in-depth analysis of Bio-Techne Corp's valuation, inviting readers to delve into the financial intricacies of this life sciences manufacturer.
A Snapshot of Bio-Techne Corp (NASDAQ:TECH)
Based in Minnesota, Bio-Techne is a life sciences manufacturer supplying consumables and instruments for the pharma, biotech, academic, and diagnostic markets. The company reports in two segments, protein sciences (75% of revenue), and diagnostics and genomics (25%). The United States accounts for about 55% of revenue, with EMEA, the U.K., and APAC contributing to the rest. Despite a current stock price of $72.31, the GF Value, an estimation of fair value, is set at $106.85, suggesting that Bio-Techne (NASDAQ:TECH) might be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price 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.
Bio-Techne Corp (NASDAQ:TECH), with a market cap of $11.40 billion and a stock price of $72.31 per share, appears to be significantly undervalued based on the GF Value. Therefore, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of Bio-Techne
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Bio-Techne's cash-to-debt ratio of 0.45 ranks worse than 86.76% of 1518 companies in the Biotechnology industry. However, its overall financial strength is 8 out of 10, indicating strong financial health.
Profitability and Growth of Bio-Techne
Investing in profitable companies carries less risk. Bio-Techne has been profitable for 10 years over the past 10 years. Over the past 12 months, the company had revenues of $1.10 billion and an Earnings Per Share (EPS) of $1.76. Its operating margin of 25.6% is better than 91.93% of 1029 companies in the Biotechnology industry. Overall, GuruFocus ranks Bio-Techne's profitability as strong.
Growth is a crucial factor in a company's valuation. Bio-Techne's 3-year average annual revenue growth is 14.4%, ranking better than 60.37% of 762 companies in the Biotechnology industry. However, its 3-year average EBITDA growth rate is 5.6%, ranking worse than 50.64% of 1256 companies in the Biotechnology industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Bio-Techne's ROIC is 11.44, and its cost of capital is 11.89.
Conclusion
In conclusion, the stock of Bio-Techne (NASDAQ:TECH) shows every sign of being significantly undervalued. The company's financial condition is strong and its profitability is robust. However, its growth ranks worse than 50.64% of 1256 companies in the Biotechnology industry. To learn more about Bio-Techne stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
