Is Now The Time To Buy Baxter Stock?

Core Viewpoint - Baxter International's stock has declined by 14% over the past month due to a disappointing earnings report and reduced full-year guidance, raising questions about its current valuation at approximately $25 [2] Financial Performance - Baxter's revenues have contracted at an average of 5.7% over the last three years, while the S&P 500 has seen a growth of 5.3% [6] - In the last 12 months, revenues rose by 3.6% to $11 billion, compared to a 5.2% increase for the S&P 500 [6] - Quarterly revenues grew by 4.3% to $2.8 billion from $2.7 billion a year earlier, while the S&P 500 experienced a 6.1% growth [6] Profitability Metrics - Baxter's operating income for the last four quarters was $398 million, resulting in a poor operating margin of 3.7%, significantly lower than the S&P 500's 18.8% [5] - The company's operating cash flow totaled $765 million, yielding a low cash flow margin of 7.0% compared to 20.2% for the S&P 500 [12] - Baxter reported a net income of -$155 million, translating into a negative net margin of -1.4%, while the S&P 500 had a net margin of 12.8% [12] Valuation Analysis - Baxter's price-to-sales (P/S) ratio is 1.2, which is significantly lower than the S&P 500's ratio of 3.3, indicating that Baxter stock appears inexpensive relative to the broader market [3] - The stock is currently valued at 1.3 times trailing revenue, well below its five-year average of 2.6 times, suggesting that the market has already factored in its performance challenges [9] Financial Stability - Baxter's balance sheet is described as adequate, with total debt standing at $9.7 billion against a market cap of $13 billion, resulting in a moderate debt-to-equity ratio of 77.2% compared to the S&P 500's 20.2% [12] - Cash and equivalents amount to $1.7 billion out of total assets of $21 billion, yielding a cash-to-assets ratio of 8.0%, which is slightly above the S&P 500's 7.0% [12] Downturn Resilience - Baxter's stock has performed slightly better than the S&P 500 during some recent downturns, indicating moderate resilience [8] - The stock has experienced significant declines in the past, including a 64.6% drop from $89.45 in February 2022 to $31.71 in October 2023, compared to a 25.4% drop for the S&P 500 [12]