A - Embedded Expectations Analysis - 2020 08 20
Agilent Technologies, Inc. (A:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 33.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about business growth, China operations, and customersSpecifically, management may lack confidence in their ability to perform well in Q3, grow gross margins, and improve their Life Science and Applied Markets Group (LSAG) instrument business, particularly from COVID-19 testing and research. In addition, they may have concerns about their China operations, hospitals' ability to resume cancer screening, and the uncertain duration and severity of the coronavirus. Moreover, they may lack confidence in their ability to sustain Agilent CrossLab Group (ACG) business performance, capitalize on customers shifting their supply chains, and negotiate NASD contracts with customers. Furthermore, they may be exaggerating business strength, their focus on supporting customers and genomics business, and the coronavirus-related benefits of the Chemical & Energy business
Agilent Technologies is engaged in life sciences, diagnostics and applied chemical markets. The company's segments are: Life Sciences and Applied Markets Business, which provides instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products; Diagnostics and Genomics Business, which includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses; and Agilent CrossLab Business, which spans the entire lab with its consumables and services portfolio to improve customer outcomes.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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