Frank Laukien, CEO and President of Bruker Corporation (NASDAQ:BRKR) has disclosed to the SEC that he directly purchased 100,000 shares on September 14th at an average price of $13 per share. At Insider Monkey, we like to track insider activity because it can give an indication of what people with more information than us about the company think about its future prospects. In particular, insider purchases tend to be bullish signs (read our discussion of academic studies on insider trading). This is probably because insiders must be very confident in the stock in order to buy: rather than leave their investments fairly diversified, they are investing more money in the same company which pays them and thus taking a big risk that its fortunes will not decline. So while we can’t invest in every stock bought by an insider, they make for good places to start looking for good investments. This is Laukien’s first large purchase of stock in some time according to our database, having sold a number of shares in 2010 and 2011 when the stock was trading at considerably higher prices (see his history of insider purchases and sales).
Bruker Corporation provides a wide range of scientific instruments and products, including imaging machines for life science functions as well as superconducting materials. In the second quarter the company saw its revenue edge up 5% compared to its sales in the second quarter of 2011, bringing its performance for the first half of 2012 to a 9% improvement over the same period last year. The growth in the second quarter occurred despite the strengthening of the U.S. dollar: ignoring both recent acquisitions and foreign exchange factors, revenue increased by 10%. However, Bruker’s expenses have also been up. Costs of goods sold and SGA expenses mitigated the revenue increases, with larger investments in R&D pulling earnings per share for the first half of the year down from 20 cents to 15. As such, the company missed analyst earnings expectations, and the drop in the stock price following the release of the quarterly results is part of the reason why the stock, at a 7% increase, underperforms broader market indices.
At a $2.2 billion market capitalization, Bruker Corporation trades at 27 times trailing earnings. However, Wall Street analysts expect strong results over the next several quarters; specifically, a good second half that brings 2012 earnings per share to 67 cents (an implied P/E of 20 at the current stock price) and then 25% EPS growth next year. This brings the forward P/E down to 16.
We would consider Agilent Technologies Inc. (NYSE:A) and FEI Company (NASDAQ:FEIC) to be two comparable companies in the scientific and technical instruments industry. These companies are cheaper than Bruker, at least on a trailing basis: their respective P/Es are 14 and 20. Agilent saw a steep fall in its earnings last quarter compared to the same period in the previous year, which may explain its lower pricing (its forward P/E multiple is 12). FEI, however, saw good growth though a good deal of growth potential is already captured in the stock price, which is up 70% from a year ago. Danaher Corporation (NYSE:DHR) and Thermo Fisher Scientific Inc. (NYSE:TMO) are two additional peers. These companies are also cheaper than Bruker: they trade at 17 and 21 times trailing earnings, respectively. However, they both saw decreases in their earnings in their most recent quarter compared to a year earlier even though both increased their revenue, and Thermo Fisher’s decline in particular was quite steep. We don’t think it is that good an idea to copy the insider buy here, as several peers trade more cheaply in the market.