Medical device maker C.R. Bard (BCR) broke out last month because it beat the street estimate of $2.18 by 9 cents. Overall profit growth was just 10%, and revenue rose just 4%, but investors were still impressed.
C.R. Bard was founded in 1907. It’s first product was one that relieved urinary discomfort, and this lead to the development of the first balloon catheter. In 1961 the company was focused on urology and began to move into the cardiology, radiology and anesthesiology markets. Bard was good at acquiring little companies with product ideas, then bringing them in and then doing line extensions. In the 2000s the company became a big player in advanced stents.
BCR has increased its dividend in each of the last 43 years. It gets a top safety rating of 1 from Value Line. With an expected profit growth rate of slightly less than 11% a year in addition to a dividend of less than 1%, the stock could produce a 11% total return. But at 22 times earnings, BCR fairly valued. If you’re getting in, you’re not getting a discount.
Ten Year Chart
The ten-year chart isn’t as pretty as it should be considering profits rose in every year but one, and in that year (2013) the company had many charges which affected EPS even though net income was still higher than 2012’s.
The break out is a positive sign, especially since the dollar is strong and hurting companies that do a lot of International sales. in 2012 the company outlined a multi-year investment plan to invigorate growth in emerging markets. Today, a third of C.R. Bard sales come from abroad, which makes the 10% profit growth last qtr look even better as the strong dollar has been hurting companies with lots of International revenue.
Profit History
BCR had a P/E of around 21-22 around ten years ago, before the stock market crash of 2008. Like many value stocks, this one was undervalued after the crash as it regained lost ground. Just last year the stock had a median P/E of 18, and now the P/E has jumped to 22. This makes me cautious. The stock seems fairly valued here.
Sharek’s Take
C.R. Bard has proven to be an excellent investment for conservative investors for decades. It’s increasing its dividend for 43 consecutive years and gets a top rating for safety. Management even bought back around 8% of shares in 2014, which enhanced EPS. Still, this 12% grower is selling for 22x earnings, and that’s the top of the historical range. Therefore I feel this is good time to make a small investment, but I would wait for a pullback before making a bigger one.
View the One Year Chart here. View the Earnings Table here.
