SIAL Fundamental Research Investment Analysis, Sigma-Aldrich Corp.

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Sigma-Aldrich Corporation (SIAL)

The Razor's Edge

2-Year Price History

Recent Price
(2/13/2009)
$38.41
52-Week Price
$34.33 - $63.04
Market Capitalization
$4.8 Billion
Dividend Yield
1.50%
Most Recent Dividend
$0.46

About Sigma-Aldrich Corp.

Sigma-Aldrich Corporation is considered to operate in the Basic Materials sector. They specifically operate in the Specialty Chemicals business segment contained within the Chemicals industry.

A Life Science and High Technology company develops, manufactures, purchases and distributes biochemicals and organic chemicals.

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SIAL Revenue

As a value investing shop, we are interested in seeing how SIAL's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 2.61x and the low end of the range at 1.83x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for SIAL of 1.98x is somewhat below its historical weighted average by 11%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

SIAL Cash Earnings

Looking at SIAL specifically in their Cash Earnings capabilities, Ockham views SIAL as significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for SIAL to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 14.09 and a 9.63 low over the same period.

Now that SIAL’s current price is $38.41 and its Price to Cash Earnings ratio is 9.87, we are very positive on its outlook from the cash earnings perspective. In fact, SIAL is now trading a full 17% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why SIAL has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

SIAL Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for SIAL to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for SIAL is $0.58 producing a current dividend yield of 1.51%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from SIAL against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from SIAL over previous years was 1.69% while the lowest dividend yield was 0.64%. It's hard not to notice that SIAL pays a current dividend yield that is 29.61% above the historical median. This peaks our interest since our analysis is looks favorably upon dividend yields that are greater than the historical median.

Peer Comparison

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Sigma-Aldrich Corp. Industry Grouping

(2/13/2009)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding SIAL) 7.55 3.47 » 21.47 1.64 0.45 » 3.46 13.31% 21.71%
*10 year range does not include current year values
Agrium Inc. AGU $6.4 Billion $40.52 3.56 2.49 » 20.94 0.60 0.41 » 2.28 20.40% 13.97%
Sherwin-Williams Company SHW $5.5 Billion $46.94 7.28 5.34 » 25.12 0.69 0.52 » 1.13 9.08% 31.16%
Sigma-Aldrich Corp. SIAL $4.8 Billion $38.41 9.87 9.64 » 68.76 1.98 1.40 » 3.59 11.05% 19.64%
Sociedad Quimica Y Minera De Chile S.A.Sponsored ADR Repr 1 Pref Shs -B- SQM $3.8 Billion $31.73 15.55 4.09 » 29.14 4.97 0.79 » 9.30 16.48% 10.48%
FMC Corp. FMC $3.5 Billion $47.56 7.11 2.47 » 16.67 1.17 0.19 » 2.08 7.28% 12.06%
CF Industries Holdings Inc. CF $3.1 Billion $54.68 4.27 2.94 » 15.51 0.79 0.32 » 2.51 n/a 40.86%
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Key Fundamentals

SIAL - Sigma-Aldrich Corporation Fundamentals
Price (2/13/2009) $38.41
Volume (2/13/2009) 1.2 Million
10 Day Average Volume 2.3 Million
13 Week Price Range $34.33 - $43.54
52 Week Price Range $34.33 - $63.04
LTM Revenue $2.2 Billion
 
Shares Outstanding (12/2007) 125.4 Million
Market Capitalization $4.8 Billion
Shares Held By Institutions 101.2 Million
Institutional Holders 548
% Shares Held By Institutions 80.70%
Earnings Per Share (EPS) $2.34
P/E Ratio 14.70
Book Value Per Share $12.10
 
Gross Margin 55.40%
Quarterly Dividend 0.58
Dividend Yield 1.50%
Beta 0.80
Fiscal Year Ends December