Abbott Laboratories (ABT) stock has been on a roll, just off 52-week highs and now approaching all-time highs. I decided to take a closer look in the stock and see if it is worth pursuing at these prices. Here are the 6 points I looked at:
Valuation: Abbott’s five-year trailing valuation metrics suggest that the stock is slightly undervalued. Abbott’s current P/B ratio is 3.5 and it has averaged 4.1 over the past five years with a high of 6.0 and a low of 3.1. Abbott’s P/S ratio is 2.3 and it has averaged 2.7 over the past five years with a high of 3.6 and a low of 2.1. Abbott’s current P/E ratio is 19.3 and it has averaged 21.7 over the past five years with a high of 55.3 and a low of 13.4.
Price Target: The consensus price target for the analysts who follow Abbott is $58. That is upside of 2% from ABT’s current stock price. That is very limited upside.
Forward Valuation: Analysts forecast that Abbott will earn $5.03 per share next year. With a current stock price of $55.86, that is a forward P/E multiple of 11.1. Although there are no direct comps because of patents and proprietary products involved, it makes sense to look at what other large drug stocks are trading at. Eli Lilly (LLY) is trading 11.7 times next year’s earnings. Merck (MRK) is trading 10.0 times next year’s earnings. Pfizer (PFE) is trading 9.3 times next year’s earnings. Abbott is trading just above the mean forward P/E for the four large-cap drug stocks.
Earnings Estimates: Abbott beat EPS estimates the last four quarters, each time by one penny.To continue reading, click here.