With shares of Life Technologies Corporation (NASDAQ:LIFE) trading at around $60.79, is LIFE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Life Technologies was one of the hottest stocks last Friday, enjoying a 10.59 percent gain. This was due to rumors that the company was in talks with private equity firms and healthcare companies about a potential sale. Rumors of potential buyers included Danaher Corp. (NYSE:DHR) and General Electric (NYSE:GE). Neither chose to comment on the rumor. General Electric has a policy never to comment on any rumors of this nature, which makes it difficult to tell if there is any real potential. We do know that General Electric is constantly looking to grow in many different areas, and that it wants to be a leader in future technologies. In this case, Life Technologies is attractive because its technology has the ability to create a blueprint of someone’s DNA. This can lead to disease diagnosis, risk identification, and increased accuracy for target medicines. There is no doubt that there is great value here. However, the buyout range being thrown around at the moment is anywhere from $55 per share to $70 per share. Considering the stock is currently trading at $60.79 per share, there is more upside than downside. However, there is still downside potential, and there is a pretty good chance that nothing will happen in the immediate future.
Assuming there is no buyout soon, let’s take a look at Life Technologies as it stands on its own.
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for Life Technologies is normal, but the balance sheet is in negative territory. Operating cash flow is decent at $872.71 million.
T = Technicals on the Stock Chart Are Strong
Illumina Inc. (NASDAQ:ILMN) has outperformed Life Technologies over the past three years, but Life Technologies has been stronger over the past few months. These two companies are listed as competitors because they both offer DNA sequencing. However, Life Technologies is more diversified. WuXi Pharma Tech Inc. (NYSE:WX) is a much smaller player in the Medical Laboratories & Research industry.
At $60.79, Life is currently trading above all its averages.
E = Earnings Have Been Steady
Earnings have improved every year since 2008. Revenue has improved every year since 2007. These are both positive signs.
When we look at the last quarter on a YoY basis, we see a decrease in revenue and earnings. That said, you should never put too much weight on one quarter.
T = Trends Support the Industry
The sole fact that companies like Life Technologies and Illumina Inc. have advanced technologies that larger companies desire equals a positive trend.
Even if there is no buyout for Life Technologies, the company is well-positioned for the future. This is a company that’s in the right place at the right time. Furthermore, Life Technologies has consistent growth, solid margins, decent debt management, and a good valuation with a Trailing P/E of 13.97 and a Forward P/E of 1.53. Based on recent rumors, it’s possible the stock is now a ahead of itself if nothing comes to fruition, but Life Technologies is still a long-term OUTPERFORM.
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