Is Abbott Laboratories Trading at a High Valuation in September?

ABT’s forward valuation multiples

On September 19, Abbott Laboratories (ABT) was trading at a forward PE multiple of 21.8x, while its trailing-12-month PE multiple was 52.4x. Its forward PE and trailing-12-month PE multiples were 19.2x and 55.7x, respectively, a few months ago in May.

The forward PE multiple is an estimate of a company’s growth potential over the next 12 months. It’s determined by dividing a stock’s current price by the company’s next-12-month earnings estimate. A high forward PE implies an overvalued or high-growth stock.

Abbott stock has been gaining momentum recently, and its valuation has improved. However, ABT is trading at higher forward PE multiple than the industry average of 16.6x, according to Reuters’ estimates. However, its higher valuations seem to be more representative of its high growth.

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PEG multiple

For a growth-adjusted valuation multiple, let’s take a look at Abbott Laboratories’ PEG (PE-to-growth) multiple. On September 19, Abbott Laboratories had a 12-month forward PEG multiple of ~1.7x compared to the ~1.5x PEG multiple it reported in May.

On September 19, Abbott Laboratories’ peers Johnson & Johnson (JNJ), Thermo Fisher Scientific (TMO), and Boston Scientific (BSX) had forward PEs of 16.5x, 20.2x, and 24.4x, respectively, and forward PEG multiples of 1.9x, 1.5x, and 2.1x, respectively.

Abbott Laboratories’ PEG multiple is lower than those of its peers, which suggests that the company’s higher forward PE is more representative of its high growth expectations.

ABT stock seems to be trading at higher valuations than a few months ago, as the company has strengthened its position with an impressive financial performance, product approvals, product launches, and key collaborations and partnerships. Abbott Laboratories was trading at its 52-week high on September 14. The company has successfully overcome the tough times it faced with the big-ticket acquisitions of St. Jude Medical and Alere in 2017.