We came across a bullish thesis on Agilent Technologies, Inc. (A) on “From $100K to $1M” & More’s Substack by YZ and TJ Terwilliger. In this article we will summarize the bulls’ thesis on A. Agilent Technologies, Inc. (A) share was trading at $141.95 as of Sept 19th.
A technician in a lab inspecting an ELISA test kit for use in biopharmaceutical diagnostics.
Agilent Technologies is a well-established company operating in life sciences, diagnostics, and applied chemical markets, providing comprehensive solutions including instruments, software, services, and consumables. Spun off from Hewlett-Packard in 1998, Agilent’s diverse revenue streams across pharmaceuticals, diagnostics, academic, chemical, food, and environmental markets highlight its strong market positioning and recurring revenue model, with over half of its revenue being recurrent. The company’s primary segments are life sciences and applied markets (56% of revenue), diagnostics and genomics (21%), and CrossLab services (23%), with its products playing a crucial role in laboratories worldwide. Agilent benefits from a strong brand, offering a suite of services thus customers are hesitant to shift due to the complexity and cost of changing equipment and processes.
Agilent’s financials reveal stable revenue and income growth, along with substantial free cash flow generation. Despite being smaller than industry giants like Danaher and Thermo Fisher, Agilent holds a leading position in its niches, enabling it to compete without relying on price cuts. The company is profitable with healthy gross and net margins, and its balance sheet remains solid with manageable debt levels. However, the entire life sciences industry has recently faced a slowdown, and while Agilent projects growth rates of 4-6%, there is some uncertainty about the speed of recovery in certain markets. Nonetheless, long-term growth remains intact, with the industry expected to grow at a steady pace.
The company’s leadership, led by recently appointed CEO Padraig McDonnell, boasts extensive internal experience, with Agilent insiders owning significant stock. While McDonnell’s track record is still developing, his long tenure at the company suggests a deep understanding of the business. One potential risk is whether McDonnell will successfully manage capital allocation and maintain Agilent’s historical focus.
Looking at valuations, Agilent is trading at reasonable multiples, aligning with historical ranges, and a discounted cash flow model estimates a fair value of $105 to $168 depending on the discount rate. Agilent also has an interesting “lottery ticket” in its pharmaceutical API business, where it has doubled capacity to meet rising demand for therapeutic oligonucleotides used in treating various diseases. This segment holds potential for future growth and could drive further upside. Overall, Agilent presents a solid investment case, combining stable growth, strong market positioning, and long-term potential in its API business.
Agilent Technologies, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held A at the end of the second quarter which was 37 in the previous quarter. While we acknowledge the risk and potential of A as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than A but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.