Baxter International: A Possible Value Trap

Cody Hooper
31 Followers
(9min)

Summary

  • Baxter International Inc. appeared undervalued with a P/E of 17.7 and over 2% dividend, but deeper analysis revealed it as a potential value trap.
  • Despite strong revenue growth, Baxter struggles with profitability, high long-term debt, and a lack of forward growth.
  • Baxter ranks well below the sector median on key forward metrics, with a 3-5Y EPS CAGR of -1%.
  • Recent events, like the sale of its Kidney business and plant shutdown, add uncertainty, making it a risky investment despite initial value stock appearance.

Piggy bank in a volatile position

J Studios

When I recently came across Baxter International Inc. (NYSE:BAX), I thought I might have a value stock. Although the stock had been down more than 59% over the last three years, the P/E (FWD) seemed reasonable at 17.7, and the company had

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31 Followers
I am obsessed with evaluating stocks to beat the S&P 500 over my lifetime. When I was a kid, I had no formal training about money or the stock market. I watched family real estate taken away from me in foreclosure and I became determined to master money. I was gifted the book, The Intelligent Investor and I was so captivated by the idea of finding have since read, studied, and obsessed over how to evaluate and invest in stocks with an audacious goal of outperforming the S&P 500. Through my exhaustive training, I have learned that finding stocks that will outperform over a long period is challenging, takes an exuberant amount of patience, and most importantly requires a substantial amount of self-aptitude. When I write articles about stocks I find interesting I am writing letters to myself to make myself a better investor, but also to help me gain a greater understanding and a more well-rounded perspective on the stocks I am considering. I hope you find them as helpful as I do.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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