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About BD
It was the middle of the week and I was feeling weak.
I was dehydrated, mentally exhausted and my body was just straight up not having it.
After spacing out for a few days, not feeling like myself and becoming incredibly depleted energy-wise, I ended up taking a trip to my local health clinic, allowing the experts to perform a few tests and was subsequently informed that I had an infection induced by not drinking nearly enough water given what I do on a daily basis, including my prized recreational, thoughtful and all too time consuming walks around the neighborhood and my university’s campus as well as the 90-minute tours I perform as a tour guide at my university, among other activities involving exercise.
During this period of time, I was bedridden and seriously bummed.
I had to take a week off of work, miss important bits and pieces of time with people I really, really wanted to spend time with, but had to learn my lesson the hard way, and looking back on it, I totally deserved it.
Now, I am proud to admit that I am a water fiend and proudly so, and I even have developed a sort of quasi-support system of those that are close to me that, following this incident, will incessantly ask if I would like some water, allowing myself to at times even share their own water with myself.
It pays to have great people in your corner.
But let’s get back to the events themselves.
In the midst of the mild chaos and getting prescriptions and helpful preventative tips from the clinic’s staff, I did what any normal person would’ve done and looked over to my left and saw a white metal box with the letters “BD” inscribed on the face, and then prior to actually listening to the clinicians and focusing on getting this health ailment under complete control, made it a point to remember to look up whether or not this “BD” was a publicly traded company and if so, I’d make sure that I wrote about it on this here website.
Obviously, I had my priorities straight.
Thankfully, I was in luck.
Franklin Lakes, New Jersey-headquartered Becton, Dickinson and Company is indeed a publicly traded firm (NYSE: BDX) and it is engaged primarily in the manufacturing and sale of medical devices and other instruments that one could pretty much find in practically any given doctor’s office, hospital or, you guessed it, clinic, or basically any other formal medical setting.
Given these initial and broad based facts, I am going to make an assumption that this company was experiencing an uptick in demand for its products during the onset and duration of COVID-19, as it likely jumped in on the manufacture and sale of face masks and other COVID-related devices sooner rather than later and was, I imagine, able to boost its revenues during the 2019 and 2020 era.
Whether or not I am actually correct, a simple and candidly depressing fact of the matter is that people are both getting more and more unhealthy, and combining the fact that baby boomers are getting older and will more than likely require more medical assistance in the years and decades to come, an objective truth rooted in this is that more devices and instruments will likely be needed to fulfill the gradually (or maybe even exponentially) heightened demand for healthcare at the aforementioned venues.
This is apparently an objective net positive for an enterprise such as Becton, Dickinson and Company.
In being a little more specific regarding what the company actually makes and sells, Becton’s product lines and items include medical devices such as catheters, other types of intravenous (IV) equipment and mechanisms, needles, medical waste disposal equipment, reagent racks, specialty paper products for medical settings as well as high-tech laboratory analysis systems, among many other products and doodads.
Becton, Dickinson and Company is a gigantic medical device and instrument company with something like someone with Marfan syndrome has; a lot of reach.
Case and point, Becton, Dickinson has a reported market share of a whopping 61.6% in the needles and syringe categories alone, obviously, its absolute and overall market share (i.e., accounting for all of the other products it sells) being much less, as it competes with some avidly fierce and notable competitors such as Baxter International, Cardinal Health, Zimmer Biomet, Medline, and other large players in the medical device industry.
At the end of the day, BD can, I think, reasonably be thought of as the Sysco of the medical device space in that is a large, more than likely slow-moving company with a lot of moving parts that supplies a wide array of mission critical products that are generally concentrated in one field (BD’s being medical, Sysco’s being food).
Now, allow me to walk you through some of the highlights of the company’s primary financial statements and other pertinent metrics and figures so as to ultimately put together an opinion of whether or not this company’s stock (NYSE: BDX) is worth buying today and never selling tomorrow.
BD’s stock financials
In getting this show on the road, Becton, Dickinson and Company is a $67 billion company with a corresponding stock price of $240.90 and also maintains a price-to-earnings (P/E) ratio of 49.37 all while issuing its shareholders an annual dividend of a healthy $3.80, which I will initially assume it can afford to issue given just how long it has been in business, and in that, given that it has probably carved out a pretty decent cash flow stream from its business operations (will certainly verify later).
I’ll be honest, the taste in my mouth still isn’t the sweetest at the moment, particularly given just how lofty Becton’s prevailing price-to-earnings ratio stands, directly implicating itself as being not only a merely expensive stock, but an overvalued stock on the generally held basis that if a stock has a price-to-earnings ratio greater than 20, it is said to be overvalued, or trading at a share price that is higher than that of its actual, fair, intrinsic share price value, or in other words, what it is really worth actually paying for at the moment you look at that company’s stock.
With this in the eggshell, Becton’s shares are seemingly overvalued, and while I might be a little more optimistic if this company were a younger, leaner operation, as this could most definitely play a role in justifying overpaying for a stake in a rapidly growing company, this company in question is, to my initial understanding, not at this stage at all, and while it may perhaps be growing its revenues on a year-over-year (YOY) basis (again, I will check on this momentarily), it more than likely isn’t doing it at a fast enough rate to justify overpaying by this wide of a margin for a slice of the Becton, Dickinson pie.
This is one of the rare instances in which I’d just love to be wrong.
At any rate, as it relates to the overall condition and breakdown of Becton’s balance sheet, the company’s executives are in charge of tending to and taking care of almost $52.8 billion in terms of total assets along with approximately $27 billion in terms of total liabilities, with its total assets standing nearly double the height of its liabilities, being a very good sign, but I frankly had no preconceived notions that this company was going to run itself out of business by virtue of being overleveraged anytime soon, but a little classic confirmation never hurts, and with all of the moving parts within the scope of Becton’s operations, crafting an overall balance sheet structure such as this one should not be viewed as a small feat at all.
Onto the company’s recent revenue numbers as they are shown on the income statement, Becton, Dickinson and Company’s more recent revenues have been pretty flat, ranging between a relative low of just north of $16 billion in 2020 to a relative high of $19.3 billion, as reported in 2023.
First of all, the egg is definitely on my face given that the company’s revenues actually dipped during the initial COVID-19 era, which, I suppose upon further thought makes sense being that many domestic clinics and labs were shut down, the company still managing to derive a great deal of consistent demand through its hospital channels but likely experiencing softening through the aforementioned closed, smaller-scale medical venues.
In the world of investing, it takes a certain degree of humility and willingness to be wrong and I am both ready and willing.
Both secondly and lastly on the note of revenues, as it blends with its present price-to-earnings picture, it is my opinion that Becton, Dickinson has not grown its recent annual revenues at a rate quick enough to reasonably justify overpaying this much.
The slow-moving company box has been checked, that’s for sure.
In other words, the valuation and current share price metrics are negatively skewed and the fact of the matter appears to be that BD’s stock (NYSE: BDX) is overvalued on the prime basis of revenue growth, or really, the lack thereof.
Shifting gears towards the company’s cash flow statement, BD’s total cash from operations have, like its related revenues, remained in good, not great company in terms of a range, plotted between a low of $2.6 billion (2022) and a high of $4.6 billion (2021), which to me is largely yet another indication of this company’s lack of growth but certainly an objective sign of stability in continuing to extract a somewhat consistent and predictable amount of cash each and every recent year from the sales it makes and the operations that it, well, operates.
BD’s stock fundamentals
Regarding Becton, Dickinson and Company’s net profit margin, as it is stated on Charles Schwab’s platform, is frankly underwhelming, especially as it measures up against that of the competition, with its net profit margin listed as 6.99%, which is on the lower end when brushing up against just a handful of competitors such as Edwards Lifesciences, Dexcom and Resmed, with their respective net profit margins pegged at much more intriguing figures of 22.95%, 16.82% and 20.91%.
If such a discrepancy occurs, I can usually attribute it to a company being younger and/or more aggressive in the way it invests and reinvests back into its business(es), however, once again, Becton is not by any stretch of the imagination a young company (founded in 1897) and thus this type of excuse isn’t one that could feasibly be used, and while for certain company’s with this sort of scale can get an ever so slight pass on low net profit margins (given the sheer scale of their global operational footprint that tend to naturally mute margins), Becton’s is hardly even comparable to some of its direct competitors, so as it currently stands with the company’s net profit margin, I am far from feeling peachy keen, jelly bean.
Should you buy BD stock?
Frankly, my dear, I don’t think this company’s stock (NYSE: BDX) has much to offer at the moment.
While I don’t enjoy conjecturing that a stock has limited upside and that it cannot go up any higher in price or value, much of the aforementioned facts, figures and numerical trends are whispering in my ear softly and sweetly that this stock is not a very attractive investment prospect, at least for the time being and from the perspective of value.
Mainly, its valuation is stretched as can be (i.e., overvalued) given its current price-to-earnings ratio and associated revenues.
While there are certainly some positives within Becton, Dickinson and Company, such as the healthy and seemingly reasonable annual dividend it offers, its balance sheet being in war-ready shape, not to mention its recent annual revenues and cash flows being stable as all get out, its comparable net profit margin is indeed incredibly, how do I put this politely, lame, and I frankly think there are better, cheaper options and value opportunities out there.
Also, as a brief sidenote, while I am an avid unbeliever in past performance being a promising indicator of future performance, BD’s stock returns over the past five years have been disappointing in my eyes, and being as large and un-nimble as this healthcare supplier is, I feel it makes the most sense, all things considered, to lend this company’s stock a “sell” rating for the time being.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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