- If you are wondering whether Becton Dickinson is starting to look like value at today’s share price, or if it deserves to be cheap, this breakdown will help you decide how the current market view stacks up against different valuation methods.
- The stock last closed at US$157.09, with returns of 0.5% over 7 days, a 5.1% decline over 30 days, and a year to date decline of 19.4% that leaves the 1 year return at a 2.3% decline and the 3 and 5 year returns at declines of 16.7% and 10.8% respectively.
- These moves have been unfolding against a backdrop of ongoing attention on large medical equipment names like Becton Dickinson, as investors reassess where resilient cash flows and balance sheets may sit in their portfolios. That context makes it especially important to separate sentiment from what the underlying valuation numbers are actually saying.
- On Simply Wall St’s checks, Becton Dickinson currently scores a 6 out of 6 valuation score, and the rest of this article will walk through traditional methods like discounted cash flow and multiples, then finish with a way of tying these numbers into a fuller view of the company’s value story.
Find out why Becton Dickinson's -2.3% return over the last year is lagging behind its peers.
Approach 1: Becton Dickinson Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model looks at the cash Becton Dickinson is expected to generate in the future and discounts those cash flows back to today to estimate what the business might be worth right now.
For Becton Dickinson, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow stands at about $2.60b. Simply Wall St then uses analyst forecasts for the next few years and extends them, with projections reaching $3.73b of free cash flow by 2030, all in dollar terms. Each of those future cash flows is discounted back using a required rate of return to reflect risk and the time value of money.
On this basis, the DCF model arrives at an estimated intrinsic value of about $215.04 per share. Compared with the recent share price of $157.09, the model implies an intrinsic discount of 26.9%, which indicates that Becton Dickinson is trading at a sizable gap to this cash flow based estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Becton Dickinson is undervalued by 26.9%. Track this in your watchlist or portfolio, or discover 64 more high quality undervalued stocks.
Approach 2: Becton Dickinson Price vs Earnings
For a profitable company like Becton Dickinson, the P/E ratio is a useful way to gauge how much you are paying for each dollar of earnings. It links the share price directly to profits, which is often the anchor for long term returns.
What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually go with a lower P/E.
Becton Dickinson currently trades on a P/E of about 25.5x. That is close to the broader Medical Equipment industry average of 25.7x and below the peer group average of 31.9x. Simply Wall St also calculates a “Fair Ratio” of 29.1x, which is the P/E it would expect given Becton Dickinson’s earnings growth profile, industry, profit margins, market cap and risk factors.
This Fair Ratio is more tailored than a simple industry or peer comparison because it adjusts for company specific characteristics rather than assuming all firms deserve the same multiple. With the current P/E (25.5x) sitting below the Fair Ratio (29.1x), the shares screen as trading at a discount on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Becton Dickinson Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced as a simple way for you to connect your view of Becton Dickinson’s story to a set of numbers like expected revenue, earnings, margins and a Fair Value that can be compared directly with today’s price.
On Simply Wall St’s Community page, Narratives let you pick or build a storyline. For example, you can choose one that aligns with the consensus Fair Value of about US$196.08, a more optimistic view closer to about US$253.28, or a cautious view around US$183.00. You can then see how each storyline flows through to different assumptions on revenue trends, profit margins and future P/E.
Because each Narrative links a clear story to a financial forecast and a Fair Value, and updates when fresh information such as news, earnings or guidance is added to the platform, you can quickly see whether your preferred Becton Dickinson Narrative suggests the shares are above or below your Fair Value range, and decide if that price gap is large enough to act on or to simply keep watching.
Do you think there's more to the story for Becton Dickinson? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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