Is Abbott Stock Worth Buying at a Discounted P/S Valuation?

Core Viewpoint - Abbott Laboratories (ABT) is strategically positioned to leverage its diversified business model and strong market presence, particularly in biosimilars and diabetes care, despite facing industry-wide challenges such as margin pressure and declining COVID-19 testing demand. Group 1: Financial Performance and Valuation - Abbott's stock has risen 9.6% over the past six months, outperforming the industry's 8.5% growth and the broader Medical sector's 9.8% decline [4] - The company is trading at a forward 12-month price-to-sales (P/S) multiple of 4.4X, which is a 22% discount to the Zacks Medical Products industry average of 5.6X, indicating the stock is undervalued [11] - Abbott's trailing 12-month return on equity (ROE) of 20.18% significantly outpaces the industry average of 16.61%, highlighting its operational efficiency [25] Group 2: Business Segments and Growth Initiatives - Within the Established Pharmaceuticals Division (EPD), Abbott is advancing in biosimilars, with plans to commercialize several products in oncology and women's health by 2025 [2] - The company is gaining momentum in Diabetes Care through consistent upgrades of its FreeStyle Libre continuous glucose monitoring system [7] - Abbott's diversified business portfolio, including a strong Adult Nutrition segment, is helping regain market share despite softness in the pediatric arm [21] Group 3: Challenges and Market Conditions - Abbott faces industry-wide challenges such as margin pressure due to inflation, labor shortages, and supply chain disruptions, which are increasing operational costs [3] - The company has experienced a decline in COVID-19 testing demand, with organic sales in Rapid Diagnostics decreasing by 3% in the last reported quarter [22] - A challenging macroeconomic environment is leading to higher-than-anticipated increases in raw material and freight expenses, impacting overall business performance [15] Group 4: Strategic Partnerships and Innovations - Abbott has formed partnerships with five major companies offering automated insulin dosing pumps, enhancing the connectivity of its Libre technology [5] - The company announced a partnership with the Big Ten conference to boost U.S. blood supply through a blood donation competition [14] - Abbott is progressing with its Alinity family of diagnostics, which is expected to significantly contribute to its Diagnostics business in the second half of 2024 [14]