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Baxter (BAX) Soars to a 52-Week High, Time to Cash Out?

Zacks Equity Research
Updated

Have you been paying attention to shares of Baxter International BAX)? Shares have been on the move with the stock up 7% over the past month. BAX hit a new 52-week high of $75.62 in the previous session. Baxter International has gained 16.6% since the start of the year compared to the 1.7% move for the Medical sector and the 10.8% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on April 26, 2018, Baxter International reported EPS of $0.7 versus the Zacks Consensus Estimate of $0.62 while it beat the consensus revenue estimate by 2.13%.

For the current fiscal year, Baxter International is expected to post earnings of $2.89 per share on $11.37 billion in revenues. This represents a 16.53% change in EPS on a 7.65% change in revenues. For the next fiscal year, the company is expected to earn $3.22 per share on $11.89 billion in revenues. This represents a year-over-year change of 11.51% and 4.61%, respectively.

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Valuation Metrics

Baxter International may be at a 52-week high right now, but what might the future hold for BAX? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Baxter International has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 26.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 19.2X versus its peer group's average of 19.7X. Additionally, the stock has a PEG ratio of 1.95. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Baxter International Inc. Price and Consensus

 

Baxter International Inc. Price and Consensus | Baxter International Inc. Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Baxter International currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Baxter International passes the test. Thus, it seems as though BAX shares could have a bit more room to run in the near term.

How Does Baxter International Stack Up to the Competition?

Shares of Baxter International have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Surmodics SRDX, Haemonetics HAE, and Stryker SYK, all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Baxter International. Still, the fundamentals for BAX are promising, and it still has potential despite being at a 52-week high.


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Baxter International Inc. (BAX) : Free Stock Analysis Report
 
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