In the Sci-Fi adventure movie Jurassic Park, Jeff Goldblum plays the part of Dr. Ian Malcomb who offers up the famous quote “life finds a way.” Although this fictional tale was about scientific advancements in genetics and DNA sequencing, there is a real company that is on the brink of discoveries that could prove to be even more astounding than what was portrayed in the movie. The company’s name is Life Technologies Corp. (LIFE), and there are a lot of reasons to believe that (LIFE) actually will find a way to grow their business that is. The following summary of the company is taken directly from their website:
“Life Technologies Corporation is a global biotechnology company dedicated to improving the human condition. Our systems, consumables and services enable researchers to accelerate scientific and medical advancements that make life even better. Life Technologies customers do their work across the biological spectrum, working to advance the fields of discovery and translational research, molecular medicine, stem cell-based therapies, food safety and animal health, and 21st century forensics. The company manufactures both molecular diagnostic and research use only products.”
Before I talk more about some of the exciting potentialities for significant growth I believe this exciting Biotechnology Company offers, let’s first examine this mid-cap company’s past operating history. In order to do this, I will utilize the F.A.S.T. Graphs™ fundamentals analyzer software tool to illustrate that this exciting enterprise possesses a record of exceptional historical earnings growth since they first went public in February of 1999. Moreover, note that the company was immediately profitable after going public and has strung together earnings growth averaging over 30% per annum. The orange line on the graph plots earnings growth each year since 1999.
With this next graph I overlay monthly closing stock prices with the orange earnings justified valuation line and discover a strong correlation between this company’s earnings and stock price over time. To oversimplify, when the price line touches the earnings line the company is fairly valued, when the price is above the earnings line the stock is overvalued, and when the price is below the earnings line the company is undervalued. Therefore, based on historical earnings growth, Life Technologies appears to be significantly undervalued at its current price.
When you calculate the performance associated with this mid-cap growth story you discover that the company’s powerful earnings history has produced a 14.7% annualized rate of return that is significantly greater than the 1.2% return of the Russell 1000 Growth Index at an only 1.2% per annum return. Moreover, these excellent results were achieved even though the company is currently being capitalized by the market at one of the lowest valuations in its history.
Life Technologies Corp.: Forecasting the Future
The following estimated earnings and return calculator reports the consensus 5-year earnings growth estimates of 23 analysts reporting to Capital IQ at 10% per annum. Therefore, based on our calculations of fair value, this would imply a 5-year estimated total return of 13.4% per annum by year-end 2017 (see purple circle).
This next estimated earnings and return calculator provides a “what-if” scenario based on Life Technology Corp.’s 5-year average growth rate of 31.5%. Since the company has recently averaged this rate of growth, I believe it’s at least feasible that it could continue growing at this rate into the future. Nevertheless, if it were to grow at this rate the average estimated 5-year return would explode to over 46% per annum (see purple circle). Later I will describe some reasoning behind utilizing this more aggressive forecast.
(Follow this link to a free, live, and fully functioning F.A.S.T. Graphs™ on Life Technologies Corp. Run this “tool to think with” through its paces. Draw graphs displaying 2 to 20 years of history. Discover how this tool dynamically re-evaluates valuation based on the company’s earnings and price relationship.)
An Almost Infinite Future Potential
I feel that the current estimates of the growth potential of Life Technologies Corp. fail to include the enormous potential of what the New York Times best-selling book Abundance: The Future Is Better Than You Think, by Peter H. Diamandis and Stephen Kotler refer to as P4 medicine. In the future, these authors predict that medicine will become Predictive, Personalized, Preventive, and Participatory (P4). They cite Life Technologies Corp. as one of the primary companies vying for the trillion dollar sequencing market. Although it is impossible to precisely quantify the size and scope of this opportunity, I believe it is huge, and not reflected in current estimates. However, this technology is advancing faster than most analysts recognize. Furthermore, this is one of many opportunities that Life Technologies Corp. is currently working on.
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Summary and Conclusions
I believe that Life Technologies Corp. represents an exciting growth opportunity in the rapidly expanding biotechnology industry. Admittedly, much of the growth potential that I see in this exciting mid-cap growth story is difficult to quantify. Consequently, I see this as a long-term opportunity for the aggressive growth investor looking to participate in significant advances in promising technologies such as Stem Cell Research, DNA sequencing and numerous other potentially huge future industries. Therefore, both patience and continuing due diligence are recommended. I believe a great place to start is by going on their website www.lifetechnologies.com and let your imagination and inquisitive nature be your guide.
Disclosure: No position at the time of writing. Read disclaimer here.