Agilent Technologies, Inc. (A)

Agilent Technologies has been beaten up recently yet I think it will rebound and we'll see growth begin in the near future. Their sales have stagnated and even declined since 2002 but their profitability has increased tremendously. In 2002 & 2003 they finished at a net loss for both years. What interests me is what's occurred since. Check this out: in 2004, Agilent had a return on assets of 5.17%. In 2006 (ending 10/31/06), the ROA was 45.13%. That's a huge increase. So, even though sales dipped from '04 to '06, they jacked up net income from $369 mil to $3,310 mil, aka $3.3 billion! This was done with virtually no change in total assets. The change in assets is close to the change in the "goodwill" line on their balance sheet. These guys seem much more focused than before and they're getting it right. I don't believe the market has kept pace with these changes.
In addition, they've recently acquired PXIT, Inc. This is why I believe this company is ready to continue growth. They've returned to profitability and now they're starting to gather up the means to expand. With gross margins >50% and net margins >10%, they can afford to work on the top line. All this combined with a terribly low P/E tells me the market doesn't yet have faith. That's the time to strike. Their stock price when I wrote this was around $34.00/share.

slight dip provides good entry point

Testing out a portfolio of stocks rated outperform that are characterized by having one letter ticker symbols.

strong product line; they know their business very well; lots of room for growth

The leadership of Agilent does not know how to grow a technology company, nor does it inspire its workforce. Agilent stock closed at around $41 on its first day of trading 8 years ago this month. It's now around $35. I don't expect the next 8 years to be any better. The company appears to be run by its CFO Adrian Dillon, who joined the company in 2001. He is a bean counter from Eaton, a Midwest industrial conglomerate. He's very good at lay-offs, closing businesses, selling property and outsourcing, and not much else. I sold all of my remaining Agilent stock, about $50,000 worth, in April of 2006 for around $38. I feel fortunate to have gotten out then. There is no way this company should be selling at a P/E ratio above the S&P 500 which is now around 16. If Agilent was trading at this P/E ratio it would be fairly priced at $24. Someday everyone will figure this out.

This is a cheap stock that has exhibited aome bounce. The shares are resting at a price to earnings ratio of 10.9 versus the industry average of 21.4. Yet, in the most recent quarter the gross margin was 51.5% against the industry average 30.0%. The operating margin was 7.6% versus 8.3% for the industry, however, and therein lays one of the problems. The company is going to have to improve its profitability. The stock is breaking out through $32.40, and has a pretty clear shot to $34.20. Beyond there the next leg up should lift the share price to $36.50 which is our intermediate-term price target. Nervous investors should consider a stop-loss at $30.00.

Executive leadership seems focused on cost control/cash not growth. Couple the two and Agilent would outperform.

Compelted divestitures. Company is the leader in the Test/Measurement sector. Cost cutting has positioned this company to see positive results for the next few years.

not what im looking for

Great company that covers a niche that allows for further diversification to outperform the market.

Telecom test equipment will get a boost from the new Teleco vs. Cable wars. Good array (pun intended) of biotech equipment at competitive prices. Strong fundamentals.

fool

Baby Boomers - testing and diag

Wave energy could be huge. No research done on this company but I am making a bet.

Strong Uptrend

test

Downthumb. High valuation. Nominal cash flow. Negative 5 year sales growth. Busy merging with Varian. Will likely impact net growth per share.

Telechart Pick

As of today the S&P 500 is down about 100 points and I expect it to rebound in the near future.