ModernGraham Quarterly Valuation Of C.R. Bard Inc. - March 2014

| About: C. R. (BCR)

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk. This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company. By using the ModernGraham method one can review a company's historical accomplishments and determine an intrinsic value that can be compared across industries. What follows is a specific look at how C.R. Bard Inc. fares in the ModernGraham valuation model.

BCR Chart

BCR data by YCharts

Defensive Investor - must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise - market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition - current ratio greater than 2 - PASS
  3. Earnings Stability - positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record - has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth - earnings per share has increased by at least 1/3 over the last 10 years using 3-year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio - PEmg is less than 20 - FAIL
  7. Moderate Price to Assets - PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor - must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 - current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 - Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability - positive earnings per share for at least 5 years - PASS
  4. Dividend Record - currently pays a dividend - PASS
  5. Earnings growth - EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $146.69
MG Value $166.39
MG Opinion Fairly Valued
Value Based on 3% Growth $91.41
Value Based on 0% Growth $53.58
Market Implied Growth Rate 7.38%
Net Current Asset Value (NCAV) -$11.14
PEmg 23.27
Current Ratio 3.56
PB Ratio 5.44

Balance Sheet - 12/31/2013

Current Assets $2,090,400,000
Current Liabilities $586,500,000
Total Debt $1,405,700,000
Total Assets $5,041,100,000
Intangible Assets $2,264,400,000
Total Liabilities $2,952,900,000
Outstanding Shares 77,440,000

Earnings Per Share

2013 $8.55
2012 $6.28
2011 $3.76
2010 $5.38
2009 $4.65
2008 $4.06
2007 $3.84
2006 $2.55
2005 $3.12
2004 $2.82

Earnings Per Share - ModernGraham

2013 $6.30
2012 $5.06
2011 $4.42
2010 $4.53
2009 $3.95
2008 $3.49

Dividend History

BCR Dividend Chart

BCR Dividend data by YCharts


C.R. Bard Inc. is a very intriguing company for Enterprising Investors, having passed all five of the investor type's requirements. The company does not quite qualify for the Defensive Investor due to the high PEmg and PB ratios. As a result, Enterprising Investors should feel very comfortable proceeding with further research into the company but should also compare it to other opportunities through a review of ModernGraham's valuation of Medtronic (NYSE:MDT) and ModernGraham's valuation of Covidien (COV).

From a valuation perspective, the company appears to be fairly valued, having exhibited solid growth in EPSmg (normalized earnings) from $3.95 in 2009 to $6.30 in 2013. This demonstrated level of growth supports the market's implied estimate of 7.38% earnings growth and leads the ModernGraham valuation model to estimate an intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company's prospects. What do you think? What value would you put on C.R. Bard Inc.? Where do you see the company going in the future? Is there a company you like better?

Disclosure: The author did not hold a position in C.R. Bard Inc. (NYSE:BCR) or any of the other companies mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.