A Agilent Technologies
Sticky recurring-revenue tools franchise priced for steady recovery; fair value close to the market, modest upside at best.
The story
Agilent is a mature, high-quality life sciences and diagnostics tools franchise (LC/MS instruments, consumables, services, CrossLab) with a sticky installed base. Roughly 60%+ of revenue is recurring, which gives it pricing power and resilience. After a 2023-24 destocking and China/biopharma capex slump, revenue is recovering (TTM 7.37B, up about 6%), helped by an instrument replacement cycle, GLP-1/PFAS/NASD growth pockets, and BioVectra. It is a mid-life-cycle compounder, not a high-growth story.
Growth of about 6% fits the recovery plus mid-single-digit end markets. The 26% GAAP margin sits between the current 24% and the roughly 27-28% non-GAAP margin, reflecting the Ignite cost program and mix shift to consumables and services. The 0.73 sales-to-capital figure is depressed by acquisition goodwill, so I use 1.5 for incremental, mostly organic reinvestment. A 10-year horizon fits a moated installed-base franchise that is not a hyper-grower.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 10y |
| Target operating margin | 26.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.50 |
| Beta | 1.00 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.5% |
| Terminal WACC | 9.5% |
Valuation bridge
| PV of explicit FCFF | 11.96B |
| PV of terminal value | 14.93B |
| Equity value | 25.07B |
| ÷ shares → per share | $88.94 |
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 7.81B | 6.0% | 24.3% | 1.73B | 294.88M | 1.43B | 1.31B |
| 2 | 8.26B | 5.7% | 24.8% | 1.86B | 298.10M | 1.56B | 1.30B |
| 3 | 8.71B | 5.4% | 25.2% | 1.99B | 299.86M | 1.69B | 1.29B |
| 4 | 9.16B | 5.2% | 25.6% | 2.13B | 300.05M | 1.83B | 1.27B |
| 5 | 9.61B | 4.9% | 26.0% | 2.27B | 298.59M | 1.97B | 1.25B |
| 6 | 10.05B | 4.6% | 26.0% | 2.37B | 295.39M | 2.08B | 1.21B |
| 7 | 10.49B | 4.3% | 26.0% | 2.48B | 290.40M | 2.19B | 1.16B |
| 8 | 10.91B | 4.1% | 26.0% | 2.58B | 283.56M | 2.29B | 1.11B |
| 9 | 11.33B | 3.8% | 26.0% | 2.67B | 274.85M | 2.40B | 1.06B |
| 10 | 11.72B | 3.5% | 26.0% | 2.77B | 264.26M | 2.50B | 1.01B |
Key risks
- China weakness and tariff/export-control exposure hitting instrument demand
- Biopharma and academic funding cuts (NIH) delaying the replacement cycle
- Acquisitive capital allocation diluting returns on capital
Catalysts
- LC/MS replacement cycle and Infinity III/Pro iQ launches driving instrument growth
- Ignite margin program lifting operating margin toward 27-28% non-GAAP