Is Life Technologies Likely to Outperform?

With shares of Life Technologies Corporation (NASDAQ:LIFE) trading at around $64.22, 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

Q4 EPS came in at $0.63. Excluding items, EPS was $1.11, which was in-line with expectations. Revenue increased 3 percent year-over-year to $999 million, which barely beat expectations. For FY2012, adjusted EPS was $3.98. FY2012 revenue was $3.79 billion. As far as guidance goes, FY2013 EPS is expected to come in between $4.30 and $4.45, excluding items.

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Perhaps the most important news is that the strategic review is ongoing and no decisions have been made. However, the board is open to all options, and a sale is possible. Life Technologies stock has seen a significant upward move since buyout rumors began. That’s a plus, but at what point does the company stop being a bargain? Regardless, Reuters recently reported that Thermo Fisher Scientific (NYSE:TMO) and private equity groups were considering a bid.

Now let’s take a look at Life Technologies if a buyout doesn’t come to fruition…

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Life Technologies is normal and nothing to worry about. The balance sheet is in negative territory, but also nothing to worry about at this point in time. Cash flow remains solid.   

Debt-To-Equity

Cash

Long-Term Debt

LIFE

0.53

$283.84 Million

$2.45 Billion

BIOC

0.06

$13.18 Million

$4.53 Million

TMO

0.46

$855.30 Million

$7.12 Billion

 

T = Technicals on the Stock Chart Are Strong 

Life Technologies has had a great run as of late. However, for a three-year time frame it has underperformed Thermo Fisher Scientific and BioClinica (NASDAQ:BIOC). Only Thermo Fisher Scientific offers yield, which is currently 0.80 percent.

1 Month

Year-To-Date

1 Year

3 Year

LIFE

25.75%

31.08%

29.65%

35.71%

BIOC

29.11%

26.40%

39.04%

61.38%

TMO

13.87%

16.71%

33.50%

59.88%

 

At $64.22, Life Technologies is currently trading above all its averages. 

50-Day SMA

53.17

100-Day SMA

50.85

200-Day SMA

47.57

 

E = Earnings and Revenue Have Been Steady          

Earnings and revenue have been steadily increasing on an annual basis. 2012 numbers were covered in the Catalyst section.

2007

2008

2009

2010

2011

Revenue ($)in billions

1.28

1.62

3.28

3.59

3.78

Diluted EPS ($)

1.23

0.05

0.80

1.99

2.05

 

We already know what happened this quarter. Now let’s take a look at previous quarters.

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in millions

928.20

1.01B

939.11

949.31

911.18

Diluted EPS ($)

0.52

0.51

0.72

0.67

0.37

 

T = Trends Might Support the Industry

If United States budget cuts ever kick in, which we have to admit they eventually will, they will lead to constrained spending for Life Technologies and its peers. Life Technologies expects that this would lead to a 1 percent decline in revenue.

Conclusion

Life Technologies has solid margins, solid cash flow, and a Forward P/E of 14.49. There has also been increased demand for the company’s Ion Torrent genetic sequencing equipment. Ion Torrent is coming off its best sales quarter to date. Furthermore, Life Technologies has shown double digit growth in emerging markets. All that said, the threat of budget cuts and the inflated stock price due to buyout rumors don’t make Life Technologies an ideal investment at this point in time. Life Technologies is a WAIT AND SEE.

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