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In the learning to fish series, we provide investors with suggested guidelines for choosing a potential candidate and one candidate is selected as our play of choice. We provide reasons for this choice and in doing so hope to impart some understanding to those who are new to the field of investing. It is important that readers take the time to read and understand the selection process involved in coming up with these picks. This information can be obtained here "Our suggested guidelines when searching for new investment ideas".

Reasons to be bullish on Abbott Labs (NYSE:ABT)

  • A very strong cash flow of $8.85 billion
  • A decent yield of 3.4%
  • A good free cash flow yield of 7.95%
  • A five year dividend growth rate of 9.7%
  • Cash flow per share increased from $5.10 in 2009 to $6.66 in 2011
  • Annual EPS before NRI has increased from $2.84 in 2007 to $4.67 in 2011
  • A decent payout ratio of 59%
  • A projected 3-5 year EPS estimated growth rate of 7.68%
  • A good quick and current ratio of 1.3 and 1.4 respectively
  • A five year ROE average of 28.5%
  • A good long term debt to equity ratio of 0.47
  • Operating margins of 21.2%
  • Year over year projected growth rates of 8.9% and 6.5% for 2012 and 2013 respectively
  • An excellent interest coverage ratio of 14.88
  • A five year sales growth rate of 10.5%
  • A strong quarterly earnings growth rate of 43.8%

Company: Abbott Labs

Levered cash flow = $8.85 billion

Growth

  1. Net Income ($mil) 12/2011 = 4728
  2. Net Income ($mil) 12/2010 = 4626
  3. Net Income ($mil) 12/2009 = 5746
  4. EBITDA ($mil) 12/2011 = 8773
  5. EBITDA ($mil) 12/2010 = 8890
  6. EBITDA ($mil) 12/2009 = 9803
  7. Cash Flow ($/share) 12/2011 = 6.66
  8. Cash Flow ($/share) 12/2010 = 5.9
  9. Cash Flow ($/share) 12/2009 = 5.1
  10. Sales ($mil) 12/2011 = 38851
  11. Sales ($mil) 12/2010 = 35167
  12. Sales ($mil) 12/2009 = 30765
  13. Annual EPS before NRI 12/2007 = 2.84
  14. Annual EPS before NRI 12/2008 = 3.32
  15. Annual EPS before NRI 12/2009 = 3.73
  16. Annual EPS before NRI 12/2010 = 4.17
  17. Annual EPS before NRI 12/2011 = 4.67

Dividend history

  1. Dividend Yield = 3.4
  2. Dividend Yield 5 Year Average = 3.00
  3. Dividend 5 year Growth = 9.7

Dividend sustainability

  1. Payout Ratio = 0.59
  2. Payout Ratio 5 Year Average = 0.44

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 7.68
  2. 5 Year History EPS Growth = 13.58
  3. ROE 5 Year Average = 28.51
  4. Current Ratio = 1.53
  5. Current Ratio 5 Year Average = 1.43
  6. Quick Ratio = 1.32
  7. Cash Ratio = 0.83
  8. Interest Coverage Quarterly = 14.88

Interesting companies

For investors looking for other ideas detailed data has been provided two additional companies. Our latest article could also prove to be a source of some new ideas Alcatel-Lucent: A Simple But Effective Strategy To Turbocharge returns for almost free.

Company: American Express Co (NYSE:AXP)

Basic Key ratios

  1. Relative Strength 52 weeks = 85
  2. Dividend 5-year Growth = 2.84
  3. Cash Flow 5 -year Average = 3.54

Growth

  1. Net Income ($mil) 12/2011 = 4935
  2. Net Income ($mil) 12/2010 = 4057
  3. Net Income ($mil) 12/2009 = 2130
  4. EBITDA ($mil) 12/2011 = 10194
  5. EBITDA ($mil) 12/2010 = 9304
  6. EBITDA ($mil) 12/2009 = 6118
  7. Cash Flow ($/share) 12/2011 = 4.99
  8. Cash Flow ($/share) 12/2010 = 4.15
  9. Cash Flow ($/share) 12/2009 = 2.42
  10. Sales ($mil) 12/2011 = 28850
  11. Sales ($mil) 12/2010 = 27819
  12. Sales ($mil) 12/2009 = 24523
  13. Annual EPS before NRI 12/2007 = 3.43
  14. Annual EPS before NRI 12/2008 = 2.42
  15. Annual EPS before NRI 12/2009 = 1.54
  16. Annual EPS before NRI 12/2010 = 3.41
  17. Annual EPS before NRI 12/2011 = 4.12

Dividend history

  1. Dividend Yield = 1.5
  2. Dividend Yield 5 Year Average = 1.9
  3. Dividend 5 year Growth = 2.84

Dividend sustainability

  1. Payout Ratio = 0.17
  2. Payout Ratio 5 Year Average = 0.28

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 11.57
  2. 5 Year History EPS Growth = 6.42
  3. ROE 5 Year Average = 25.99
  4. Current Ratio = 1.22
  5. Current Ratio 5 Year Average = 1.68
  6. Quick Ratio = 1.21
  7. Cash Ratio = 0.44
  8. Interest Coverage Quarterly = 4.09

Company: Kraft Foods Inc (KFT)

Basic Key ratios

  1. Relative Strength 52 weeks = 79
  2. Cash Flow 5-year Average = 2.61

Growth

  1. Net Income ($mil) 12/2011 = 3527
  2. Net Income ($mil) 12/2010 = 4114
  3. Net Income ($mil) 12/2009 = 3021
  4. Net Income Reported Quarterly ($mil) = 813
  5. EBITDA ($mil) 12/2011 = 8142
  6. EBITDA ($mil) 12/2010 = 7106
  7. EBITDA ($mil) 12/2009 = 6114
  8. Cash Flow ($/share) 12/2011 = 3.14
  9. Cash Flow ($/share) 12/2010 = 2.81
  10. Cash Flow ($/share) 12/2009 = 2.66
  11. Sales ($mil) 12/2011 = 54365
  12. Sales ($mil) 12/2010 = 49207
  13. Sales ($mil) 12/2009 = 40386
  14. Annual EPS before NRI 12/2007 = 1.82
  15. Annual EPS before NRI 12/2008 = 1.81
  16. Annual EPS before NRI 12/2009 = 2.02
  17. Annual EPS before NRI 12/2010 = 2.02
  18. Annual EPS before NRI 12/2011 = 2.29

Dividend history

  1. Dividend Yield = 3.10
  2. Dividend Yield 5 Year Average = 3.71
  3. Dividend 5 year Growth = 2.07

Dividend sustainability

  1. Payout Ratio = 0.5
  2. Payout Ratio 5 Year Average = 0.57
  3. Change in Payout Ratio = -0.07

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 8
  2. 5 Year History EPS Growth = 4.35
  3. ROE 5 Year Average = 10.91
  4. Current Ratio = 0.90
  5. Current Ratio 5 Year Average = 0.97
  6. Quick Ratio = 0.50
  7. Cash Ratio = 0.22
  8. Interest Coverage Quarterly = 3.7

Conclusion

Long-term investors can use strong pullbacks to open up positions in stocks they would not mind owning for the long haul. A great way to get into a stock at a price of your choosing is to sell puts at strikes you would not mind owning the stock at.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware

Source: Abbott Labs: A Good Long-Term Play?

Additional disclosure: EPS and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Earnings estimate and growth rates sourced from dailyfinance.com. Ycharts data source from Ycharts.com