Baxter International (BAX) Could Be 17% Undervalued Following Its Hospital Recovery Narrative
Baxter International (BAX) has drawn fresh attention after recent trading left the shares at US$23.80, with returns down over the past month but higher across the past 3 months.
Recent trading puts that US$23.80 share price in context. Baxter International has a 90 day share price return of 14.37% and a year to date gain of 22.05%, although the 1 year total shareholder return is slightly down and the 3 and 5 year total shareholder returns show much steeper declines, which hints that recent momentum is rebuilding after a prolonged weaker stretch for long term holders.
Compare Baxter International's recent rebound with other potential turnaround stories by scanning our curated list of 32 high quality undervalued stocks.
Baxter International has climbed off the lows and put up a solid 90 day run. The real puzzle now is whether that rebound still leaves enough upside to compensate for the risks buyers are taking at US$23.80.
Most Popular Narrative: 17.2% Undervalued
The most followed valuation narrative for Baxter International pegs fair value at about $28.73, above the recent $23.80 close. This frames the current rebound as only a partial catch up to that estimate.
Normalization of hospital purchasing patterns and patient admissions is expected to drive increased utilization of Baxter's core IV solutions and infusion systems as fluid conservation efforts abate, providing upside to revenue growth and margin expansion as volumes recover.
Read the complete narrative. Read the complete narrative.
Want to see what underpins that gap between price and fair value? The narrative focuses on a revenue glide path, margin rebuild, and a future earnings base that is described as materially different from today. It also explores how those moving parts add up to a higher implied valuation multiple while still remaining below sector averages.
Result: Fair Value of $28.73 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
Still, Baxter International faces real pressure if hospital IV conservation remains near 20% below historical usage and if quality issues on key infusion devices last longer than expected.
Find out about the key risks to this Baxter International narrative.
Next Steps
Baxter International clearly has both bright spots and trouble areas, so move quickly from headline impressions to your own judgment by weighing its 4 key rewards and 1 important warning sign.
Looking for more investment ideas beyond Baxter International?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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