Acquired by Invitrogen in 2008, Applied Biosystems developed and marketed research instruments, such as solutions for DNA, RNA, protein, and small molecule analysis, for the life sciences and other industries.
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
The merger of Seven Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company into PerSeptive Biosystems, Inc., a Delaware corporation, was consummated on January 22, 1998. PerSeptive develops, manufactures, and markets an integrated line of proprietary consumable products and advanced instrumentation systems for the purification, analysis, and synthesis of biomolecules. As a result of the Merger, PerSeptive, which is the surviving corporation of the Merger, became a wholly-owned subsidiary of the Company on that date. Also, as a result of the Merger, each outstanding share of common stock of PerSeptive (PerSeptive Common Stock) was converted into shares of common stock of the Company (Perkin-Elmer Common Stock) at an exchange ratio equal to 0.1926. Accordingly, the Company issued 4.6 million shares of its common stock for all outstanding shares of PerSeptive common stock. Each outstanding option and warrant for shares of PerSeptive Common Stock was converted into options and warrants for the number of shares of Perkin-Elmer Common Stock that would have been received if such options and warrants had been exercised immediately prior to the effective time of the Merger. All shares of Series A Redeemable Convertible Preferred Stock of PerSeptive outstanding immediately prior to the effective time of the Merger were converted in accordance with their terms into shares of PerSeptive Common Stock which were then converted into Perkin-Elmer Common Stock. As a result of the Merger, PerSeptive's 8-1/4% Convertible Subordinated Notes Due 2001 became convertible into Perkin-Elmer Common Stock. The Company's fiscal year ends June 30 and PerSeptive's fiscal year ended September 30. The fiscal 1998 condensed consolidated statement of operations for the nine months ended March 31, 1998 combined the Company's operating results for the nine months ended March 31, 1998 with PerSeptive's operating results for the six months ended March 31, 1998 and for the three months ended September 30, 1997 (PerSeptive's fiscal 1997 fourth quarter). The fiscal 1997 condensed consolidated statement of operations for the nine months ended March 31, 1997 combined the Company's results of operations for the nine months ended March 31, 1997 with PerSeptive's results of operations for the nine months ended June 30, 1997. In order to conform PerSeptive to a June 30 fiscal year end in fiscal 1998, PerSeptive's results of operations for the three months ended September 30, 1997 have been reflected in the Company's condensed consolidated statement of operations for the nine months ended March 31, 1998 and in the fiscal year ended June 30, 1997. The Merger qualified as a tax free reorganization and has been accounted for as a pooling of interests. Accordingly, the Company's financial results have been restated to include the combined operations.
On April 27, 1999, the Company's shareholders voted in favor of a recapitalization proposal to create two new classes of common stock. The proposal also resulted in The Perkin-Elmer Corporation becoming a wholly-owned subsidiary of PE Corporation, a new Delaware corporation formed by The Perkin-Elmer Corporation to effect the recapitalization. The recapitalization was effective as of the close of business on May 5, 1999 when PE Corporation issued separate securities to track the performance of its PE Biosystems Group and Celera Genomics Group businesses.
On March 6, 2000, PE Corporation completed a follow-on public offering of Celera Genomics Group Common Stock. In this offering, 4,370,000 shares were sold, netting proceeds of $943.3 million.
On May 8, 2008, we entered into a Separation Agreement with Celera Corporation, at that time one of our wholly-owned subsidiaries, to separate all of the business, assets, and liabilities of the Celera group from our remaining business. This separation was completed on July 1, 2008, by means of a redemption of each outstanding share of Celera stock in exchange for one share of common stock of Celera Corp., which now holds all of the business, assets, and liabilities previously attributed to the Celera group. On July 1, 2008, following the consummation of the Celera separation, Celera Corp. became an independent, publicly-traded company whose shares are listed on The NASDAQ Stock Market under the symbol "CRA." The Applied Biosystems group became our only business and Applied Biosystems stock became our only class of outstanding common stock. In connection with the Celera separation, we changed our corporate name from Applera Corporation to Applied Biosystems Inc.
Biotech company Invitrogen (IVGN) has inked a deal to buy Applera Corp.'s scientific-instrument company Applied Biosystems (ABI) in a $6.7 billion cash and stock deal. Under the deal announced Thursday morning, Applera-Applied Biosystems shareholders will receive $38 for each share in a combination of 55% in Invitrogen common stock and 45% cash. Applera-Applied Biosystems shareholders will have the option to request all cash or all stock. The $38 per-share value represents a premium of 17% to Applied Biosystems's closing price Wednesday.