When Danaher‘s former CEO, Tom Joyce, took over from Larry Culp in September 2014, he managed a $41 billion market cap company — dwarfed by the $250 billion market cap of industrial giant General Electric . Joyce left the role this past September, while Culp is now at the helm of GE. Meanwhile, Danaher’s market cap of $166 billion is now almost double that of GE’s $84.6 billion.
The change is the all the more remarkable, considering Danaher spun off its industrial business, under the name of Fortive, in 2016 and floated its dental products business, Envista, this year. It’s been an incredible period for Danaher, but after a 52% rise in 2020, is the stock still a good value?
Why Danaher stock has soared in the past six years
To understand if Danaher is a good value, it’s a good idea to look at just why the healthcare company’s stock price has soared. There are probably three main reasons.
First, the separation of the Fortive and Envista businesses has helped the market along its path of gradually rerating Danaher in line with the life sciences and diagnostics sector.
Danaher’s valuation, using price to free cash flow (FCF), only broke out of the bottom of the life sciences and diagnostics sector range in 2020, and for long periods from 2017-2019 it traded toward the bottom.
