This scientific instrument manufacturer is growing at double-digit rates.
Bruker Corporation (BRKR)
From Validea Hot List Newsletter
Strategy: Contrarian Investor
Based on: David Dreman
Bruker Corporation (BRKR) designs and manufactures scientific instruments, and analytical and diagnostic solutions. Its segments include the Bruker BioSpin Group; the Bruker Chemicals, Applied Markets, Life Science, In-Vitro Diagnostics, Detection (CALID) Group; the Bruker Nano Group, and the Bruker Energy & Supercon Technologies (BEST) Segment.
The Bruker BioSpin Group segment designs, manufactures and distributes enabling life science tools. The Bruker CALID segment designs, manufactures and distributes life science mass spectrometry instruments that can be integrated and used along with other sample preparation or chromatography instruments, as well as chemical, biological, radiological, nuclear and explosive detection products. The Bruker Nano segment designs, manufactures and distributes spectroscopy and microscopy instruments. The BEST segment develops and manufactures superconducting and non-superconducting materials and devices. It also focuses on nanomechanical testing instruments.
MARKET CAP: PASS
Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of “accounting gimmickry”, and companies of this size have more staying power. BRKR has a market cap of $6,295 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. BRKR’s EPS for the past 2 quarters, (from earliest to most recent quarter) 0.28, 0.50 have been increasing, and therefore the company passes this test.
EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: PASS
This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. BRKR passes this test as its EPS growth rate over the past 6 months (150.00%) has beaten that of the S&P (-3.85%). BRKR’s estimated EPS growth for the current year is (37.72%), which indicates the company is expected to experience positive earnings growth. As a result, BRKR passes this test.
CURRENT RATIO: PASS
A prospective company must have a strong Current Ratio (greater than or equal to the average of its industry [2.19] or greater than 2). This is one identifier of financially strong companies, according to this methodology. BRKR’s current ratio of 2.18 passes the test.
PAYOUT RATIO: PASS
A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for BRKR is 14.02%, while its historical payout ratio has been 20.97%. Therefore, it passes the payout criterion.
RETURN ON EQUITY: PASS
The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 17.92%, and would consider anything over 27% to be staggering. The ROE for BRKR of 22.16% is high enough to pass this criterion.
PRE-TAX PROFIT MARGINS: PASS
This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. BRKR’s pre-tax profit margin is 12.91%, thus passing this criterion.
LOOK AT THE TOTAL DEBT/EQUITY: PASS
The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 69.89%. BRKR’s Total Debt/Equity of 38.04% is considered acceptable.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, March 22, 2019