Valuation Scorecard: Stock Rating D-Negative (3/18/24)-Abbott Laboratories (ABT).

At the current price of $110, what is the market’s view of Abbott Laboratories’ future operating performance? Abbott Laboratories’ common shares will need to reach $184 to achieve average annual stock market performance of 9.0% over the next 6 years. To achieve Upper quartile performance, Abbott Laboratories’ stock price will need to reach $217 by 2029.

Executive Summary

• Key Abbott Laboratories characteristics: high financial strength, high profitability, above average expected growth, and instability. A big positive influence on Abbott Laboratories’ valuation is its superior Risk Profile.
• Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Abbott Laboratories Peer Group. Recent market returns have outperformed the Abbott Laboratories Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Abbott Laboratories shares should reach a level of $76 by 2029 — an -3.5% per year total shareholder return. A 2029 stock price of $184 would reflect median performance and a price of $217 would be required to reach upper quartile performance.
• Abbott Laboratories’ historical growth is slightly below average. Historical growth has been below average relative to the Abbott Laboratories Peer Group and forecasted growth is relatively high. Revenue Growth has lagged. This factor has negatively affected market perceptions of Abbott Laboratories. Abbott Laboratories’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Abbott Laboratories’ consensus growth expectations are lower than historical growth.
• Pretax Margin is group leading. This factor has strengthened market perceptions of Abbott Laboratories. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Risk Profile has been Abbott Laboratories’ biggest valuation strength. Abbott Laboratories’ risk profile is favorable. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively high. The debt/capital ratio has declined.

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