The COVID-19 pandemic continues to generate significant revenue and profit tailwinds for Danaher (DHR), but base revenue growth is also accelerating into the recovery, boosted not only by more cyclical recoveries in the product ID/marking and water businesses, but also normalization (and leveraging COVID-19-driven system placements) in diagnostics, and torrid ongoing bioproduction growth. Really, everything keeps going Danaher’s way, and it remains to management’s credit (current and past) that they positioned the business to leverage such significant acyclical growth opportunities like bioproduction and diagnostics.
Valuation remains just as problematic. What’s a fair price for an acyclical growth machine leveraged to the burgeoning bioproduction market and the strong-and-steady diagnostics market, as well as a more cyclical but high-quality industrial business in product ID and water? Relative EV/EBITDA could argue for a high enough multiple to drive some upside, but I’m sure I’ll hear some whinging about how that approach lacks rigor. Long-term discounted free cash flow suggests a more modest mid-single-digit return from here, but I wouldn’t bet against this compound growth machine doing better than that.
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Danaher's Growth Machine Keeps On Roaring, With No Slowdown In Sight For Bioproduction
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