Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Life Technologies Corp. (LIFE) Overvalued?

Page 1 of 2

On April 15, Thermo fisher announced its acquisition of Life Technologies Corp. (NASDAQ:LIFE) for $13.6 billion plus approximately $2.2 billion in net debt. This report analyzes the growth of Life technologies and concludes whether LIFE is over- or undervalued.

Life Technologies Corp. (NASDAQ:LIFE)

About Life Technologies

Life technologies produces systems and reagents that enable and simplify biological research within academic, clinical, and commercial research applications.

First Quarter results and outlook

Revenue for the first quarter 2013 increased by 2.5% to $962.5 million over the $939 million reported for first quarter of 2012. However, the operating margin saw a dip by 80 basis points (29.4%) compared to the same period the prior year. The business output in Asia pacific grew 10% compared to 5% in Americas, 3% in Europe, and 1% in Japan. Asia pacific grew in all its business segments – research consumables, genetic analysis and applied sciences.

The management expects the revenue for the second quarter to be in the range of $950 – $955 million.

Life Technologies Corp. (NASDAQ:LIFE) has witnessed around a 60% increase in stock price in the last one year. The graph below demonstrates that it has vastly outperformed the S&P 500.

Source: Yahoo Finance

Competition and industry

Life Technologies is currently trading at a Trailing PE ratio of 31.32 in comparison to the industry average Trailing PE of 24.34[1]. Its competitors Meridian Bioscience, Inc. (NASDAQ:VIVO), Abaxis Inc (NASDAQ:ABAX) and Omnicell, Inc. (NASDAQ:OMCL) are currently trading at trailing PEs of 25.47, 16.04 and 36.9 with expected EPS growth rates of 8%, 17% and 32%, respectively. Life has a clear competitive advantage over its competitors on the following:

–Price: The economies of scale equips Life to sell the products at competitive prices

–Robust e-commerce platform : Life gets almost half of the orders[2] from the online platform

–Growth & Investment in Asian markets: Expansion into emerging markets such as China, India, Korea and Latin America is one of the key growth strategies. The recent acquisition of KDR biotech, a leading reagents distributor based in Seoul, Korea is just one example

–Innovation: Life has strong capabilities in next-generation sequencing and has wide portfolio of consumables for genomics, and molecular and cell biology

Relative Valuation

The regression of Trailing PEs of 24 companies in Medical Supplies Non-Invasive category against their expected growth in EPS provides the following:

PE = 16.4 + 65.74*Expected growth in EPS

The predicted Trailing PE of LIFE, by plugging its expected growth in EPS of 9.5%, provides a PE of 22.6 which is lower than the Trailing PE of 31.32. That signifies that LIFE is overvalued by 39%.

The scatter plot below demonstrates whether the stock Life Technologies Corp. (NASDAQ:LIFE) is cheap or too expensive. In order for the stock to be cheap, it should have low PE and high growth rate in EPS. The stock LIFE does not fit the criteria for ‘cheap stock’ as the median growth rate of the companies is 11% while the LIFE’s growth rate is 9.5%.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!