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. " Its winning streak will continue for years to come."

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 including failed acquisitions and technology missteps," says Muken, who raised his rating to buy from hold in February.

Invitrogen's "current business is the envy of many managers," says Muken, who doesn't own shares. His firm says it does -- and seeks to do -- business with companies mentioned in research reports.

Morningstar analyst Jeff Viksjo says the stock is still too expensive, even though the price is down from the high $90s in December to the low $80s in March. He gives Invitrogen two stars and he pegs a fair value at $68 a share. In February, he told subscribers that even though Invitrogen has a "wide collection of top research brands," it still "must make its operations more efficient to create value for shareholders."

Because Invitrogen competes with many companies selling similar products, there is "little opportunity to raise prices," he says. "There are almost no barriers to entry in the industry, and start-up firms routinely develop new technologies that challenge existing ones."

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