A $500 billion US medical Company That Beat Analysts’ Expectations For The Tenth Time in a Row | July 17

In this article we analyze an American medical company worth almost 500 billion dollars. Last week it released its quarterly financial statements and beat analysts’ expectations for the tenth time in a row. It reported quarterly profit of over $5 billion and positive operating cash flow up 60% over the same period last year. In addition, the valuation multiple that relates market value to operating cash flow (P/CFO) is 10.8, the lowest figure since 2017.

This analysis focuses on the quarterly financial results released in the latest earnings report and aims to provide the key data you need to know to understand if the company has grown compared to previous years and if it beat analysts’ expectations.

Key data is represented through intuitive tables and graphs and it is possible to have a complete and original overview of the quarterly and overall results with our Checklists.

The Checklist | Last Quarter focuses on the last quarter and consists of 25 questions that allow us to understand if and by how much the analysts’ expectations have been beaten, if the company is accelerating growth compared to recent years in terms of revenue, operating income, net income, cash flow from operations and in the main business margins.

The Checklist | Overall takes into consideration the company as a whole and consists of 20 questions useful for understanding what is the target price and the consensus of analysts, if the key business data/margins have improved, if the company has more attractive valuation multiples compared to the last few years and if the stock price trend is positive or negative.


Table of Contents

This article is divided into the following 8 sections, the first 4 focus on the quarterly results while the other 4 on the company as a whole:

1. Profile
General information such as market value, sector and industry in which the company operates.

2. EPS (Earnings Per Share): Actual vs Estimate
Comparison between reported EPS and expected EPS over the last 10 quarters.

3. Financials and Key Charts | Last Quarter
Key financial data released in the last quarter and comparison with previous years through intuitive charts.

4. Checklist | Last Quarter
Analysis of key financial data released in the last quarter through 25 questions.

5. Financials and Key Charts | Last 12-Months
Key financial data from the last 12 months and comparison with previous years through intuitive charts.

6. Performance vs S&P 500 Index
Company’s stock price performance compared to the S&P 500 index over the short, medium and long term.

7. Valuation Multiples
Charts of the trend of the main 4 valuation multiples and comparison with previous years.

8. Checklist | Overall
Analysis of overall key data from different areas of company through 20 questions.

Due to limited space, this article includes only some of the company’s key data.
To find out all of them, we recommend downloading the pdf report.

*The content of this article is for informational purposes only an in no case constitute an investment advice. Past performance is no guarantee of future performance. To read the complete disclaimer click here.


1. Profile

This first section is introductory and it shows some general information to understand what the company does (Sector, Industry and Description), the market value expressed in billions of dollars (Market Cap) and the stock price (Last Price).

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2. EPS (Earnings Per Share): Actual vs Estimate

This second section shows the company’s Earnings Per Share (EPS) reported during the last quarter (EPS Actual) and compares it with what analysts expected (EPS Estimate) to understand if the company was able to beat expectations (EPS Surprise > 0), be in line (EPS Surprise = 0) or miss (EPS Surprise < 0).

Beating analysts’ expectations or not often produces a change in the stock price in the very short term, while what moves the price in the medium to long term is the ability to produce profits and grow, data included in the next section.

The downloadable pdf contains additional data on analysts’ expectations such as the target price for the next 12 months and analysts’ consensus on whether to buy, hold or sell the stock.


3. Financials and Key Charts | Last Quarter

This third section focuses on the financial results released by the company in the last quarter and is divided into 2 subsections: Financials and Key Charts.

For each of the 2 sections, the main metrics useful for evaluating the performance of a business are taken into consideration:

  • Revenue
  • Operating Income and Operating Margin
  • Net Income and Net Margin
  • Cash Flow From Operations and CFO Margin
Learn more about metrics

An explanation of each of the metrics considered is provided below.

  • Revenue:
    Indicates the revenue generated by the company from the sale of products/services.
  • Operating Income and Operating Margin:
    Indicates the company’s operating income and is calculated by subtracting all operating costs (cost to produce goods/services, personnel costs, marketing costs, depreciation and other non-cash operating costs) from revenue. This metric is very important because it allows you to understand how the company is doing without being influenced by costs that are not directly related to the company’s production of goods/services. The Operating Margin is useful for knowing the company’s efficiency from an operational point of view, in fact it is calculated as the percentage of revenue that the company manages to transform into operating profit. The more the operating margin improves, the more efficient the company becomes.
  • Net Income and Net Margin:
    Indicates the profit after all costs, then starts from operating profit and subtracts all non-operating costs (extraordinary costs, financial interest, taxes). This metric is important because it allows you to know the company’s result by subtracting all types of costs and not just operational ones. The Net Margin is useful for understanding how much of the revenue it manages to transform into profit, therefore the more the net margin grows, the greater the ability to produce profit for the same revenue generated.
  • Cash Flow From Operations and CFO Margin:
    Indicates the cash flow that operations have generated or absorbed. This metric may look the same as operating income but it is actually different. In fact, in calculating the operating income, “non-monetary” operating costs are considered, ie those that do not really lead to a cash outflow such as depreciation and stock-based compensation. Therefore, the cash flow from operations turns out to be an extremely important metric because it tells us if the company’s operations are really generating a positive flow or if instead it is causing money to be lost. The CFO Margin indicates the amount of cash generated/burned by operations as a percentage of revenue and therefore tells us if the company is efficient. The more it improves over time, the more the company is able to generate cash from its operations for the same revenue.

Financials

This first subsection contains the main financial data released in the last quarter and the comparison with the same reported last year.

The purpose is to understand if the company has been able to grow the volume of the business by increasing revenue, produce an improved operating/net income, produce an increased cash flow from operations and improve efficiency through the improvement of the 3 main business margins.

*Financial data expressed in millions of USD

Key Charts

This second subsection presents the data from a graphical point of view to show the trend of each metric during the same quarter of the previous years and it is useful to understand if the company is progressively improving year after year.

*Financial data expressed in millions of USD

*Inside the pdf that you can download is a deeper analysis of all these metrics in the last quarter, last 12 months and last fiscal year compared to previous years through many graphs and tables.


4. Checklist | Last Quarter

This fourth section is useful for analyzing the results released by the company in the last quarter and understanding whether it was a good or bad quarter based on analysts’ expectations and more generally on the financial results compared with the periods previous useful for understanding if the company is growing and if it is doing so at higher growth rates than in the past.

The checklist consists of 25 “questions” that are based on 6 metric categories and are answered “Yes” or “No”. In the “Actual” column is the metric reported by the company in the last quarter, while in the “Benchmark” column is the comparison metric.

In particular, the following 6 categories of metrics are present:

  • EPS – Earnings Per Share:
    The questions in this category are useful in understanding whether the earnings per share reported in the last quarter are better than last year and if and by how much they beat analysts’ expectations.
  • Business Margins:
    The questions in this category are useful for understanding whether the main 3 business margins have improved compared to the same quarter last year and compared to the average of the same quarters of the previous 3 years (information useful for understanding whether margins are growing at a rate higher than in previous years).
  • Revenue, Operating Income, Net Income and Cash From Operations:
    The questions presented in these 4 categories of key business data are useful to understand if there has been growth compared to last year, compared to the average of the last 3 published quarters and compared to the average of the same quarters of the previous 3 years.

In the first row of the table in “Checks Completed” it is possible to know how many questions out of the total have been answered positively, clearly the higher the percentage the better it is and usually an excellent score is equal to or greater than 60%, if a company reaches 100 % means it was a near perfect quarter.


5. Financials and Key Charts | Last 12-Months

This fifth section has a similar structure to the section on the financials of the last quarter but in this case the more medium-long term data are considered, i.e. those relating to the last 12 months (or the sum of the last 4 quarters) put in relation with the previous periods.

Also in this section there are 2 subsections: Financials and Key Charts.

For each of the 2 sections, the main metrics useful for evaluating the performance of a business are taken into consideration:

  • Revenue
  • Operating Income and Operating Margin
  • Net Income and Net Margin
  • Cash Flow From Operations and CFO Margin

For an explanation of the individual metrics, see section 4. Financials and Key Charts | Last Quarter.

Financials

This first subsection contains the main financial data released in the last 12-months and the comparison with the same reported in the previous 12-months.

The purpose is to understand if the company has been able to grow the volume of the business by increasing revenue, produce an improved operating/net income, produce an increased cash flow from operations and improve efficiency through the improvement of the 3 main business margins.

*Financial data expressed in millions of USD

Key Charts

This second subsection presents the data from a graphical point of view to show the trend of each metric during the previous years and it is useful to understand if the company is progressively improving quarter after quarter.

*Financial data expressed in millions of USD

*Inside the pdf that you can download is a deeper analysis of all these metrics in the last quarter, last 12 months and last fiscal year compared to previous years through many graphs and tables.


6. Performance vs S&P 500 Index

This section is useful for understanding how the company is performing compared to the rest of the market, represented by the S&P 500 index, in the short, medium and long term.


7. Valuation Multiples

This section contains the top 4 valuation multiples that are used to understand how the market values the company against its key business data.

The current multiples (Current) are compared with the average value of the last year (Avg. 1-Year) and of the last 3 years (Avg. 3-Year) to verify if at the moment the company has a more attractive valuation than in the past, i.e. if the current multiple is less than that of the 2 periods considered.

The valuation multiples included here are as follows:

  • P/S (Price To Sales):
    This multiple relates the market value and revenue of the last 12 months.
  • P/EBIT (Price To Operating Income):
    This multiple relates the market value and the operating income of the last 12 months.
  • P/E (Price To Earnings):
    This multiple relates the market value and the net income of the last 12 months.
  • P/CFO (Price To Cash Flow From Operations):
    This multiple relates the market value and the cash flow generated by operations in the last 12 months.

If a valuation multiple is “N/A” it means that it cannot be calculated because operating income, net income or cash from operations are negative numbers.


8. Checklist | Overall

This last section is similar to the section Checklist | Last Quarter but the financial data do not refer to those of the last quarter but to the last 12 months (in order to have a medium-long term figure) and “questions” on other aspects of the company such as valuation, performance and some analyst metrics.

This table is intended to give you an overview of all areas of strength and weakness of the company. Below are the 3 categories of additional metrics compared to the previous version:

  • Analyst Estimates:
    Questions in this category seek to understand the company’s target price over the next 12 months, how many times the company has beaten analyst expectations over the past 10 quarters, and whether analysts recommend buying, holding, or selling the company’s stock.
  • Valuation:
    The questions in this category are based on the 4 main valuation multiples (P/S, P/EBIT, P/E and P/CFO) and aim to understand if the company currently has a more attractive valuation than in the past, checking if the current multiples are lower than the average of the last 3 years.
  • Performance:
    The questions in this category aim to understand if the company’s share price is in a positive trend in the short, medium and long term and to understand if in the last 12 months the company is outperforming the S&P 500 index. Positive trend if it is higher than the average price of the last 20, 50 and 200 days.

*If a valuation multiple is “N/A” it means that it cannot be calculated because operating income, net income or cash from operations are negative numbers.

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The content of this article is for informational purposes only and in no case constitute an investment advice. To read the complete disclaimer click here.