Are Investors Undervaluing Becton, Dickinson and Company (NYSE:BDX) By 30%?

Simply Wall St.11-14

Key Insights The projected fair value for Becton Dickinson is US$330 based on 2 Stage Free Cash Flow to Equity Becton Dickinson's US$231 share price signals that it might be 30% undervalued ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAre Investors Undervaluing Becton, Dickinson and Company (NYSE:BDX) By 30%?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-14 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/investors-undervaluing-becton-dickinson-company-110020921.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for Becton Dickinson is US$330 based on 2 Stage Free Cash Flow to Equity \n Becton Dickinson's US$231 share price signals that it might be 30% undervalued \n  ...</p>\n\n<a href=\"https://finance.yahoo.com/news/investors-undervaluing-becton-dickinson-company-110020921.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4211","symbol_name":"区域性银行","start_time":0,"source_url":"https://finance.yahoo.com/news/investors-undervaluing-becton-dickinson-company-110020921.html","article_id":"2483737958","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/qrnhoA9Y9l_fYJBd0ck5WA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/983f2bdfe32b19227b1d118c45bf4f09"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2483737958","pubTimestamp":1731582020,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The projected fair value for Becton Dickinson is US$330 based on 2 Stage Free Cash Flow to Equity. Becton Dickinson's US$231 share price signals that it might be 30% undervalued. Analyst price target for BDX is US$281 which is 15% below our fair value estimate. Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Becton, Dickinson and Company  as an investment opportunity by taking the forecast future cash flows of the company and discounting them back to today's value. The Discounted Cash Flow  model is the tool we will apply to do this. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4211":"区域性银行","BK4082":"医疗保健设备","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU1854103824.USD":"M&G (LUX) POSITIVE IMPACT \"A\" (USD) INC","FCF":"第一联邦金融","BK4504":"桥水持仓","IE00BFXG1179.USD":"BNY MELLON U.S. EQUITY INCOME \"B\" (USD) INC","LU1854104046.USD":"M&G (LUX) POSITIVE IMPACT \"A\" (USD) ACC","NYSE":"纽交所","LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","ISBC":"投资者银行","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","BDX":"碧迪医疗","BK4588":"碎股","LU1059921491.USD":"NORDEA 1 GLOBAL STABLE EQUITY \"HB\" (USDHDG) ACC","BK4585":"ETF&股票定投概念","TV":"墨西哥电视","LU1571399168.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"IP\" (USD) ACC","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4100":"有线和卫星"},"translate_title":"投资者是否低估了Becton，Dickinson and Company(NYSE：BDX)30%？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ISBC":1,"TV":1,"NYSE":1,"BDX":1,"FCF":1,"DCF":1},"content_text":"Key Insights\n\n The projected fair value for Becton Dickinson is US$330 based on 2 Stage Free Cash Flow to Equity \n Becton Dickinson's US$231 share price signals that it might be 30% undervalued \n  Analyst price target for BDX is US$281 which is 15% below our fair value estimate \n\n Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Becton, Dickinson and Company (NYSE:BDX) as an investment opportunity by taking the forecast future cash flows of the company and discounting them back to today's value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n View our latest analysis for Becton Dickinson \n The Calculation \n We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate: \n 10-year free cash flow (FCF) estimate \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$3.00b\nUS$3.49b\nUS$3.90b\nUS$4.21b\nUS$4.48b\nUS$4.72b\nUS$4.93b\nUS$5.12b\nUS$5.30b\nUS$5.47b\n\n\nGrowth Rate Estimate Source\nAnalyst x1\nAnalyst x2\nAnalyst x1\nEst @ 8.00%\nEst @ 6.39%\nEst @ 5.26%\nEst @ 4.47%\nEst @ 3.91%\nEst @ 3.52%\nEst @ 3.25%\n\n\n Present Value ($, Millions) Discounted @ 7.0% \nUS$2.8k\nUS$3.0k\nUS$3.2k\nUS$3.2k\nUS$3.2k\nUS$3.1k\nUS$3.1k\nUS$3.0k\nUS$2.9k\nUS$2.8k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$30b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.0%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$5.5b× (1 + 2.6%) ÷ (7.0%– 2.6%) = US$128b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$128b÷ ( 1 + 7.0%)10= US$65b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$96b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$231, the company appears quite good value at a 30% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:BDX Discounted Cash Flow November 14th 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Becton Dickinson as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.0%, which is based on a levered beta of 1.063. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Becton Dickinson\n\n\nStrength\n\nDebt is well covered by earnings and cashflows.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for BDX.\n\n\n\nWeakness\n\nEarnings declined over the past year.\n\n\nDividend is low compared to the top 25% of dividend payers in the Medical Equipment market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow faster than the American market.\n\n\nTrading below our estimate of fair value by more than 20%.\n\n\n\nThreat\n\nAnnual revenue is forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for BDX?\n\n\n\n Next Steps: \n Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Becton Dickinson, we've put together three additional aspects you should consider: \n\n Risks: To that end, you should be aware of the   2 warning signs  we've spotted with Becton Dickinson . \nFuture Earnings: How does BDX's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.\n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2483737958"}