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Newton Analytics rates Abbott Laboratories (NYSE:ABT) a Cow because of its great financial standing while being overvalued in the market. The overall Newton Score is a 65 (of 100 being the most) and a Newton Value of 0.196 (multiple of current price).

Detailed Analysis

Our algorithms reviewed ABT's most recent financials and measured Liquidity, Balance Sheet Strength, and Management. This is what we found:

Liquidity of the company received a score of 25 (out of 40).

  1. There is a bit too much excess working capital shored up.
  2. There is some extra liquid capital to respond to variations in business.
  3. Working capital is being used to fund the expansive revenue growth.
  4. The company's business model produces high returns.

Balance Sheet Strength received a score of 17.5 (out of 30).

  1. The company is over leveraged and should decrease its liabilities.
  2. The company is growing assets in part by leveraging existing assets.
  3. Asset growth is largely funded by the income the company is able to produce.

Management received a score of 22.5 (out of 30).

  1. Management's reported net income could be better quality. Too many expenses have been accrued causing large real adjustments in cash that are not reflected in net income.
  2. Management wisely spends towards the future growth of the company.
  3. They also return equity back the shareholders.

Valuation is a 0.196, meaning the company is overvalued (anything below a 1.0625).

  1. Net Tangible Book Value per Share = $5.19
  2. EPS = $2.49
  3. Total Value = $7.68
  4. Market Price = $39.27
  5. Newton Value = $7.68 / $39.27 = 0.196

Being overvalued and having an above average score puts this company in the Cow category.

Compared to Others in the Industry

ABT is in a Cow section of the plot graph to the left. From this graph, we can see that most companies are in the Bear section and no companies are found in the Bull category. Therefore, the Medical Appliance & Equipment industry is well matured and lacking quality stocks selling at a discount.

About the Company

Abbot Laboratories is a vertically integrated company in health care products. They discover, develop, manufacture, and sell portfolios of science-based health care products. The company's four business segments include diagnostics, medical devices, nutritionals and generic pharmaceuticals. The multinational organization has 30% for its revenue from the United States, 30% in Europe, Canada, Japan and Australia, and the remaining 40% of revenue in India, China, Russia and Brazil. Recently, Abbot Laboratories spun off its research-based pharmaceutical business (AbbVie) into a new and independent biopharmaceutical company.

Source: Abbott Laboratories: Cow Rated