As reflected at the current price of $145, what future Agilent Technologies operating performance is the market anticipating? Over the next 6 years, Agilent Technologies shares will need to reach $243 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, Agilent Technologies’ stock price will need to reach $286 by 2029.
Executive Summary
- Key Agilent Technologies characteristics: high stability, high profitability, above average financial strength, and below average expected growth. A big positive influence on Agilent Technologies’ valuation is its superior Risk Profile.
- Very high valuation, lagging shareholder returns. Current valuation levels are very high relative to the Agilent Technologies Peer Group. Recent market returns have substantially underperformed the Agilent Technologies Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Agilent Technologies shares should reach a level of $99 by 2029 — an -5.3% per year total shareholder return. A 2029 stock price of $243 would reflect median performance and a price of $286 would be required to reach upper quartile performance.
- Agilent Technologies’ historical growth is average. Historical growth has been average relative to the Agilent Technologies Peer Group and forecasted growth is relatively below average. EPS Growth has been superior. Asset Growth has lagged. Agilent Technologies’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Agilent Technologies’ consensus growth expectations are in line with past growth.
- Asset Turnover is group leading. This factor has strengthened market perceptions of Agilent Technologies. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Risk Profile has been Agilent Technologies’ biggest valuation strength. Agilent Technologies’ risk profile is very favorable. Overall variability has been only average with only average revenue variability, relatively low E.P.S. variability, and very low stock price volatility. Financial Strength is only average and earnings’ expectations are only average. The debt/capital ratio has declined very significantly.
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