Abbott Laboratories (ABT) is a worldwide health care products provider. This $72.5 billion company, based on market capitalization, employs 69,000 employees worldwide. One of their well known products include FreeStyle, which is a blood glucose monitoring system. There are more products that ABT sell that I do not know but I am less concern about that. What struck me most about ABT is the valuation and its inability to move up during the most recent bull market run. This may be because upside momentum traders are trading name like Research In Motion (RIMM), Apple (AAPL), or Freeport McMoran (FCX). I'm just the opposite of a upside momentum trader, the less upside momentum, the easier it is for me to consider buying.
Fundamentals
Currently, ABT is trading around $47, has a price-to-earnings (p/e) ratio of 14, sells at 10x cash flow, and has a dividend yield of 3.4%. ABT is less than 15% above its one year low. My model shows ABT is undervalued with a dividend yield of 3% or 13 p/e, 10x Cash flow or below $49. I weight more valuation on dividend yield and thus I believe the shares are relatively undervalued at this price. One of the most impressive things about this company is their ability to raise the dividend by 11% in April. The dividend payout went from $1.44 to $1.60.
Technicals
The technicals are another aspect I pay strong attention to prior to buying any stock. I wrote about ABT's technical back on 6/8/09 and showed a possible reversal or head-and-shoulderpattern.
To follow up with what I am seeing today, I have drawn the chart below. Two strong pattern I see are the golden cross which is when short-term moving average crosses mid-term moving average and an ascending triangle.
Finally, in the chart below we have the altimeter for ABT. The altimeter really puts thing in perspective.
As we can see, ABT has a low range at 103 and a high range at 171. In two prior instances, I have circled the areas where ABT went up and then fell back down before rising to a new overvalued level. Currently, ABT is either in the middle of another temporary rise before falling a little bit further or we could be in a full scale move straight to overvaluation. In either case, if you bought now, according to the altimeter, you wouldn't be overpaying for this stock.
I believe Abbott is at the right valuation and urge you to start looking at it. Do your research before committing your capital.