"Yeah, but the valuation!" hasn't gotten me very far with Danaher (DHR), as a combination of strong execution, healthy underlying secular market growth, and the Street's enthusiasm for exceptional acyclical (and high-margin) growth stories has pushed valuation aside as a reason not to buy. With that, the shares are up about 25% in just the last two months and up over 30% on a year-to-date basis.
Yeah, but that valuation … I love the markets that Danaher is in, and it's hard to find fault with management execution. Still, even if I assume that free cash flow will triple over the next decade (and keep growing at a mid-single-digit rate indefinitely), I have to drop the discount rate to about 6.5% just to get to today's price. I've learned not to bet against Danaher, but this is definitely a well-loved stock on the Street today, even if for valid reasons.
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