SIAL ( Sigma Aldrich ) Analysis

SIAL is a company that develops, manufactures and distributes the broadest range of high quality biochemicals and organic chemicals available in the world. These chemical products and kits are used in scientific and genomic research, biotechnology, pharmaceutical development, the diagnosis of disease and as key components in pharmaceutical and other high technology manufacturing. The Company operates in 35 countries, offers over 100,000 chemical and 30,000 equipment products and sells these products into over 150 countries.

The interesting thing about SIAL is that no single product generates more than 3% of its sales. The majority of the companies orders ( around 70% ) are for labs around the world and are $400 or lower. The company derives about 60%+ sales outside the United States.

SIAL's business is viable and has growth potential. The recent decline in the US dollar should help the company improve its bottom line. In the next segment, we will look at the SIAL financials.

First, we will look at the return on equity and return on asset numbers for SIAL. The ten year averages for both the numbers are 20.88 and 14.5% respectively. Both these numbers are impressive and point to very strong fundamentals and operations at the company.

The revenue growth at the company has averaged about 5.35% for the past ten years but the EPS has grown at a faster pace of 10% per year. The key ingredient causing the increase in EPS is the decrease in outstanding shares. The outstanding shares the company has declined from 99 million to 67 million in the past ten years. In the ten year period, the cash flow from operations has almost doubled and free cash flow has increased by about 3.5 times. The dividends per share have increased by about 11.7%/year for the past five years.

SIAL is a good stock with steady ( ~10-11% earnings growth/year ) and is not cheap. The stock is currently selling for about 10% discount to its fair value. This stock is a strong buy when its price drops becuase of the market fluctuations or variations.