Danaher Corporation ($DHR): growth is expected

Investment idea by DTI

Exchange: NYSE
Sector: Industrial Goods
Industry: Diversified Machinery

Entry strategy

Price: 103.4 (market price)
Stop-loss: 98.8
Take profit: 116, then 125
Investment horizon: up to 6 months

Company details

Danaher Corporation is an international conglomerate, specializing in water and medical machinery, including diagnostics and dental equipment. Initially, the company was founded in 1969 as a real estate investment fund, but moved into machinery in 1984 by acquiring 12 manufacturing companies. Since then, Danaher made over 20 acquisitions, many of them successful (see pic. 1):

Pic. 1. Danaher Corporation ($DHR) M&A activity. Source: Danaher

Danaher market cap is $72 billion. The company’s headquarters are located in Washington D.C. Financial summary of Hyatt performance is presented in Table 1:

Table 1. Financial overview of Danaher Corporation ($DHR). Source: MarketWatch

Technical analysis (trading plan)

Pic. 2. Trading strategy for Danaher Corporation ($DHR). Source: TradingView

Fundamental analysis

Danaher stands out among its competitors by showing superior sales growth rates. In the last quarter the company’s revenue grew by 11.64% compared to the same quarter last year. Meanwhile, the industry grew by 7.94%, while the sector only grew by 5% (see table 2).

Table 2. Danaher Corporation ($DHR) sales growth. Source: Reuters

Danaher also remains more profitable than its rivals (see table 3).

Table 3. Danaher Corporation ($DHR) profitability ratios. Source: Reuters

Despite better performance, Danaher stocks trade at a comparably low level: its P/E is 28.56, P/S is 3.83 and P/B is 2.65 (see table 4).

Table 4. Danaher Corporation ($DHR) valuation ratios. Source: Reuters

Further growth of Danaher may be driven by new acquisitions, as the company has vast experience optimizing its portfolio of brands. This March Danaher announced an acquisition of Integrated DNA Technologies, a producer of consumables for molecular biology.

Danaher Water Platform may get more business in case the regulation on water quality tightens. At this point, the department contributes about 30% of the group’s profit in 2017.

It is worth noting that the company’s life sciences business is rather stable during recessions. In 2009, it contracted only by 1%. Moreover, some of the diagnostic products have been recognized by WHO as essential. This indicates that we can expect strong continued demand for Danaher products.

Originally published at Блог DTI Algorithmic.