Stock Analysis - Danaher Corp (DHR)

From a debt perspective, the debt to equity ratio for Danaher is around 50% which I would consider normal for a company focused on merger and acquisition activities. Even with adding around 10b USD of debt since the middle of 2019, the company’s debt to equity ratio did not grow significantly.

Furthermore, the short term liabilities are well covered by their short-term assets and operating cash flow. Adding to that the interest payments are covered considering a 36x coverage-rate by EBIT which is considerably good.

Investment Case

In the following section, we will dive into the company's Moat as well as Bull and Bear cases to outline which headwind the company might face while providing insight into their strategy and growth opportunities.

Moat

Danaher does not offer a wide moat but its rather small moat derives from their very successful Danaher Business System. The system has been implemented in the mid-1980s to continuously drive performance, processes, and culture to lead to exceptional value and can be seen as a competitive advantage over other conglomerates.

The Bull Case

Danaher Corp is focused on innovation and can look back on a number of successful acquisitions over the last 30+ years. The focus on healthcare (Life Sciences + Diagnostics) and the environment positions the company in a very future-proof market.

Healthcare is always evolving and is expected to grow around 5% each year as per the 2020 Global Healthcare Outlook by Deloitte. Main drivers for the growth will include aging and growing populations around the globe as well as the costly infrastructure and growing demands for broader ecosystems.

On the environmental side, Danaher not only optimizes the supply chain but also owns companies focused on water quality. Whether it’s for consumers or agriculture, both are important pillars of our everyday life.

The Bear Case

The strongest bear case derives from its valuation. At a current P/E ratio of just over 50, it is very expensive and even more expensive than big tech conglomerates like Microsoft and Apple. It has to be seen whether the valuation can be justified with growth in the post-pandemic economy.

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Disclaimer: I do hold a position in Danaher Corporation (NYSE: DHR). In 2020 it has emerged as one of my biggest holdings in the healthcare ...

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Harry Goldstein 2 months ago Member's comment

Good analysis on $DHR, thanks.

Just-Dividends 2 months ago Author's comment

Thank you for the kind words