A Rare Find

Becton, Dickenson (BDX) makes syringes, catheters, and other disposable items hospitals use everyday. Founded in 1987, the company has increased its dividend since 43 consecutive years — since 1972. BDX is a conservative stock, earnings Value Line’s top rating of 1 for safety, which is only given to around 150 stock overall.

The stock pays a 2% dividend and if you follow the analysts estimate of 13% profit growth each year (on average) you get a 15% grower. Selling for 18 times earnings. Sounds like the right price to me.

But wait, there’s more. BDX just bought a company called CareFusion this past March. CareFusion makes precision drug dispensing equipment, which works in perfectly with those items that Becton, Dickson already sells. Now the CareFusion devices can go more mainstream as BDX has connections and a delivery infrastructure all over the world. So now profits are set to rise 19% in 2016. Now 18x earnings puts the stock at a discount.

Ten Year Chart

BDX_2015_Q3_10yrHere’s the ten-year chart of BDX. The Annual Profits look clean, but I didn’t have clear figures for the 2005-2007 period as the company Annual Reports don’t always math what Thomson Financial gives me.

Overall the stock’s given 11% profit growth, and the annual yields have been between 1.3% and 2.1% each year, so basically this stock has delivered 13% annual returns. Plus a high degree of safety.

Profit History

BDX_2015_Q3_PHBack to the valuation. With BDX’s high degrees of certainty and consistency, I think the stock’s worth 20x earnings. Also keep in mind the company is set to grow profits 19% and also pay a 2% dividend. BDX ends its fiscal year in September, and I’m already calculating my Fair Value using 2016 numbers. company.

Sharek’s Take

Becton, Dickson is a rare find these days. A conservative stock that is not only undervalued but also expecting accelerated profit growth (29% 2QtrsOut and 28% 3QtrsOut). Profits are expected to grow 19% next year, and at 18 times earnings (2016’s which start after Sept 30th) the stock’s a great addition to most any stock portfolio.

View the One Year Chart here.
View the Earnings Table here.

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