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Saturday, 06/22/2013 7:39:29 AM

Saturday, June 22, 2013 7:39:29 AM

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You can't argue with stocks which make historic highs all the time. Several pharma company stocks have recently been in the habit of doing so. BDX is also doing very well for investors, and has delivered good returns over past several years. The stock appreciated 32% during the last year, and is only ~6% below its all time high of ~$102 made recently. The dividend history of the stock is also great, with a good 2% yield over the past 5 years at a reasonable 25% payout. Fundamentally, the revenue growth has been very good over the past few years. The net income, however, has remained static and shown some declines recently. The operating margins are around 20%. Despite the great growth, the trailing P/E is less than 13 which indicates reasonable valuations. Future growth in fundamentals will be the key to continued appreciation of the stock. But the forward P/E and the high PEG ratio indicates that the growth expectations in the medium term are not very high. BDX is basically relying on new product launches, licensing and network expansion etc. for future growth. The new products will help it bolster growth and further build its IPR portfolio which is always so crucial. A smaller medical device company, PLC Systems (PLCSF) recently obtained several patents for its single proprietary product RenalGuard which is used for contrast induced neuropathy. Patents are important assets for the medical device companies, and can help in increasing sales and generating regular stream of licensing revenues. BDX's new products like the cytometer and the injection for diabetics are also expected to do well in the market. Innovation is the key to long term success. If the markets hold, then one can expect reasonable returns. Slippages can lead to some profit booking so the fundamentals have to keep pace.
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