Danaher Buys Visual Networks

One of my favorite stocks is Danaher (DHR). The company doesn’t get much press, which I don’t mind at all. I guess its business, making tools, is bit dull. Still, the company is very profitable, and that’s something I never find dull.
Yesterday, Danaher said that it’s going to buy of the great tech wreck stocks, Visual Networks (VNWK). I know all these stocks tend to blur together, but Visual was a complete disaster in a universe of disasters. How badly did Visual Networks crash and burn? Five years ago, the stock hit $83 a share. Danaher is buying it for $1.83 a share. Yep, that’s a nice 98% savings. Last year, Visual earned $15,000. Not a share, $15,000 total. In some states, they might qualify for welfare.
Danaher’s earnings have kept humming along all year, even though the stock has been pretty lazy. I think this is another bargain staring us in the face. The company recently reiterated its earnings for the fourth quarter. I always like seeing that. I’d much rather hear that there’s no major news at a good company, than a series of press releases from a turnaround stock.
Let’s play with the numbers. Danaher should make about $2.75 a share this year. That’s a nice 20% from last year. To be safe, let’s say that earnings grow by 16% next year to $3.20 a share. I think Danaher could easily sport a forward P/E ratio of 20. That’s slightly high, but certainly not unreasonable. That would give the stock a fair value of $64, which is about 13% above where it is today.
Maybe it’s not that boring after all.
dhr.bmp

Posted by on December 3rd, 2005 at 5:41 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.