The last time I wrote about Abbott Laboratories (ABT) I did not buy any more shares stating that I thought the stock had moved up too far up too quickly. The stock is down 2.65% since last writing the article versus the 1.81% gain the S&P 500 (SPY) posted. Abbott Laboratories is engaged in the discovery, development, manufacture, and sale of a portfolio of science-based healthcare products, which operates in four segments: Diagnostics, Medical Devices, Nutritionals and Generic Pharmaceuticals. On October 16, 2013, the company reported third-quarter earnings of $0.55 per share, which beat the consensus of analysts' estimates by $0.03. Year to date the company's stock is up 15.79% excluding dividends (up 17.37% including dividends), and is losing to the S&P 500, which has gained 23.26% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying more shares of the company right now for the healthcare sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 20.62, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 16.67 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.95), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 10.58%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 12.2%. Below is a comparison table of the fundamental metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 2.37% with a payout ratio of 49% of trailing 12-month earnings while sporting return on assets, equity and investment values of 7.3%, 15% and 13.6%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 2.37% yield of this company is good enough for me to take shelter in for the time being. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle-ground territory with downward trajectory and a value of 45.61, indicating a bearish pattern. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is below the red line with the divergence bars flattening out in height, indicating the bearish pattern is losing momentum. As for the stock price itself ($37.11), I'm looking at $37.87 to act as resistance and the 50-day simple moving average (currently at $36.63) to act as support for a risk/reward ratio, which plays out to be -1.29% to 2.05%.
- On 27Nov13 the company voluntarily recalled twenty lots of the FreeStyle and FreeStyle Lite Blood Glucose Test Strips. The glucose test strips were recalled for the possibility of producing false results for low blood glucose levels.
If you want a defensive company for your portfolio this is definitely the company you want with its diversified portfolio of healthcare products. Keeping that in mind, I believe the stock is now fairly valued based on future earnings and growth potential. Financially the company has improved its returns on equity, assets, investments and the dividend has been increased a whopping 57%! But alas, the dividend is too low to be hiding out in the name if you're looking for shelter if there is to be some market turbulence. On a technical basis I'd suspect the bearish move in the stock is about to subside but would not be surprised to see it fall more at the expense of the overall market for the short term. It is for these reasons I will be buying a small batch in the stock right now as it is already the second largest position in my portfolio. I'd like to see it come in a bit more before plowing a bigger amount of cash into the stock.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!