The Wall Street Angle
"Sigma-Aldrich's substantial pricing power and topnotch sales and distribution model have helped the company earn steady profits for more than a decade," says analyst Ben Johnson of the independent research firm Morningstar, in a recent report. "
He notes that the company sells a whopping 145,000 products for medical, scientific and industrial uses to commercial, academic and university clients. No customer accounts for more than 3% of sales. Johnson's greatest concerns would be a "softness" in clients' R&D spending due to cutbacks in government funding and the currency risk for a company that gets more than half of its revenue from foreign markets.
He gives Sigma-Aldrich a two-star rating -- five stars represents the best buying opportunity -- indicating its recent price in the high $50s has outrun his fair value estimate of $51 a share. Among sell-side analysts, four have buy ratings while five are neutral, says Thomson First Call.Johnson adds that Sigma-Aldrich has a "rock solid balance sheet" thanks to disciplined management. "Despite a large cash balance, the company has refrained from overpaying for acquisitions in a pricey market," Johnson says. Aggressive expansion tripped up Invitrogen for a few years, and the company is still paying on Wall Street where there are eight hold ratings vs. four buy recommendations, says Thomson First Call. However, Invitrogen posted a 30% stock gain for the 12 months ended March 20 and a 160% gain for the past five years. "Only two years ago, the words 'predictable' and 'consistent' were the antithesis of Invitrogen's business and performance," says Ross Muken of Deutsche Bank, in a March 18 research report. Invitrogen had been plagued with "numerous mistakes and miscues