ABT’s forward valuation multiples
On May 3, Abbott Laboratories (ABT) was trading at a forward PE (price-to-earnings) ratio of 19.2x, while its PE ratio was 55.7x. This compares to the company’s forward PE and LTM (last-12-months) PE multiples of 20.1x and 57.6x, respectively, in April.
However, the stock looks cheaper now. The company’s stock performance also weakened over the quarter, as its stock has declined ~0.6% over the last month and ~6.2% over the last three months.
The forward PE ratio is the estimate of a company’s growth potential over the next 12 months. It’s calculated by dividing the current price of a stock by the company’s next-12-month earnings estimate. A high forward PE mostly signifies an overvalued stock or a high-growth entity.
The PEG (PE-to-growth) ratio for Abbott Laboratories (ABT) is estimated to be a more comparable valuation multiple, as it is a growth-adjusted ratio. On May 3, Abbott Laboratories had a 12-month forward PEG ratio of ~1.5x, compared to the ~1.6x PEG multiple recorded in April.
ABT stock is trading at lower valuations. However, Abbott Laboratories has strong fundamentals with a robust product pipeline, key recent product launches, and the successful integration of St. Jude Medical and Alere over the last year. The company has a strong management team, which has implemented sound strategic growth plans despite challenging macroeconomic and company-specific factors.
On May 3, Abbott Laboratories’ peers Boston Scientific (BSX), Medtronic (MDT), and Edwards Lifesciences (EW) had forward PEs of 20.0x, 15.4x, and 27.2x, respectively, and forward PEG ratios of 1.8x, 2.5x, and 1.8x, respectively.
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