On July 21, 2023, Danaher Corp (DHR, Financial) experienced a 4.71% gain, with its stock price reaching $255.88. With a market cap of $188.8 billion and sales of $31 billion, this industrial-focused manufacturing company, transformed from a real estate organization in 1984, seems to be performing well. However, according to the GF Value, a unique indicator of a stock's intrinsic worth, Danaher (DHR) is currently modestly undervalued, with an estimated GF Value of $299.16.
Founded in 1984, Danaher Corp has evolved through a series of mergers, acquisitions, and divestitures. Today, the company primarily manufactures scientific instruments and consumables across three segments: life sciences, diagnostics, and environmental and applied solutions. In late 2022, Danaher announced plans to divest its environmental and applied solutions group in 2023, shifting its focus entirely to life sciences and diagnostics.
GF Value of Danaher (DHR, Financial)
The GF Value of a stock is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past business growth and performance, and estimates of future business performance. If a stock's price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it's significantly below the GF Value Line, its future return will likely be higher. Currently, Danaher's stock is modestly undervalued, suggesting that its long-term return is likely to be higher than its business growth.
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Financial Strength of Danaher (DHR, Financial)
Investing in companies with robust financial strength can reduce the risk of permanent capital loss. Danaher's financial strength is rated at 7 out of 10 by GuruFocus, indicating a fair balance sheet. However, with a cash-to-debt ratio of 0.37, Danaher ranks lower than 72.92% of companies in the Medical Diagnostics & Research industry.
Profitability of Danaher (DHR, Financial)
Companies with consistent profitability over the long term usually offer better performance potential. Danaher has been profitable for 10 years over the past decade, with revenues of $31 billion and Earnings per Share of $9.28 in the past 12 months. With an operating margin of 26.85%, Danaher outperforms 93.39% of companies in the Medical Diagnostics & Research industry.
Growth of Danaher (DHR, Financial)
Company growth is a critical factor in valuation. Danaher's average annual revenue growth is 20%, which ranks better than 67.82% of companies in the Medical Diagnostics & Research industry. The 3-year average EBITDA growth is 31.9%, outperforming 72.92% of industry peers.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Danaher's ROIC is 10.1, and its WACC is 7.48, indicating that the company is creating value for shareholders.
Conclusion
In summary, Danaher Corp (DHR, Financial) appears to be modestly undervalued. The company has a fair financial condition and robust profitability, with growth better than 72.92% of companies in the Medical Diagnostics & Research industry. For more information on Danaher stock, check out its 30-Year Financials here.
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