Unveiling Bio-Techne (TECH)'s Value: Is It Really Priced Right? A Comprehensive Guide
Investors are often challenged with the task of determining if a stock is overvalued, undervalued, or fairly valued. For Bio-Techne Corp (NASDAQ:TECH), which experienced a daily loss of -2.37% and a 3-month loss of -6.18%, this task becomes even more crucial. With an Earnings Per Share (EPS) (EPS) of 1.76, is the stock modestly undervalued? This article aims to answer this question by providing an in-depth valuation analysis of Bio-Techne Corp (NASDAQ:TECH). We encourage you to read on for a comprehensive understanding of the company's value.
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 the rest of the world accounting for the remaining 45%. Comparing the stock price with the GF Value, an estimation of fair value, paves the way for a deeper exploration of the company's value.
Understanding the GF Value of Bio-Techne (NASDAQ:TECH)
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance.
For Bio-Techne (NASDAQ:TECH), the GF Value estimates the stock's fair value based on these key factors. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 78.26 per share, Bio-Techne stock is estimated to be modestly undervalued. This suggests that the long-term return of Bio-Techne's stock is likely to be higher than its business growth.
Financial Strength of Bio-Techne Corp (NASDAQ:TECH)
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Bio-Techne has a cash-to-debt ratio of 0.45, which is worse than 86.52% of 1521 companies in the Biotechnology industry. However, GuruFocus ranks the overall financial strength of Bio-Techne at 8 out of 10, indicating that the financial strength of Bio-Techne is strong.
Profitability and Growth of Bio-Techne Corp (NASDAQ:TECH)
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Bio-Techne has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.10 billion and Earnings Per Share (EPS) of $1.76. Its operating margin of 25.6% is better than 91.87% of 1033 companies in the Biotechnology industry. Overall, GuruFocus ranks Bio-Techne's profitability as strong.
Growth is probably one of the most important factors in the valuation of a company. Bio-Techne's 3-year average revenue growth rate is better than 60.39% of 765 companies in the Biotechnology industry. However, Bio-Techne's 3-year average EBITDA growth rate is 5.6%, which ranks worse than 50.55% of 1262 companies in the Biotechnology industry.
Evaluating ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Bio-Techne's ROIC was 11.44, while its WACC came in at 11.28.
Conclusion
In conclusion, the stock of Bio-Techne Corp (NASDAQ:TECH) is estimated to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 50.55% of 1262 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.
