Hologic makes diagnostics products, medical imaging systems and surgical products focusing on women's health.
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$8.06||-10%||2.4%||-1.5%|
|BV including aggregate dividends||-10%||2.4%||-1.5%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
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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.
On January 26, 1996, the Company completed a secondary public offering of an additional 2,492,000 shares (post split) of the Company's Common Stock at a price of $19.90 per share which resulted in net proceeds (after deducting issuance costs) of approximately $49,300,000.
On August 29, 1996, the Company acquired all of the common stock of FluoroScan, an industry leader in the field of mini c-arm imaging systems. All results have been restated to reflect the acquisition of FluoroScan in a pooling-of-interests transaction. All share and per share data has been retroactively restated to reflect a 2-for-1 stock split that occurred on March 25, 1996. On a combined basis, the Company recognized total revenues of $91.6 million, a 62% increase when compared to revenues of $56.5 million for fiscal 1995. Net income for fiscal 1996 would have been approximately $12 million, or $1.03 per share, as compared to $10.9 million, or $.96 per share, for Hologic, absent the one time charges incurred in the fourth quarter relating to the merger with FluoroScan.
On July 13, 2006, we completed the acquisition of R2 Technology, Inc. R2 Technology located in Santa Clara, California, develops and sells computer-aided detection technology and products (CAD), an innovative technology that assists radiologists in the early detection of breast cancer. The aggregate purchase price for R2 of approximately $220.6 million (subject to adjustment) consisted of 4.4 million shares of our common stock valued at $205.5 million, cash paid of $6.9 million, debt assumed of $5.7 million and approximately $2.5 million for acquisition related fees and expenses. The results of operations for R2 have been included in our consolidated financial statements from the date of acquisition as part of our mammography business segment.
On July 27, 2006, we completed the acquisition of Suros Surgical Systems, Inc. Suros Surgical, located in Indianapolis, Indiana, develops, manufactures and sells minimally invasive interventional breast biopsy technology and products for biopsy, tissue removal and biopsy site marking. The purchase price for Suros was approximately $240 million paid in a combination of cash and 2.3 million shares of our common stock. The common stock value of approximately $106.5 million, cash paid of $139 million inclusive of certain liabilities assumed, and approximately $2.6 million for acquisition related fees and expenses resulted in an aggregate purchase price of approximately $248 million. The results of operations for Suros have been included in our consolidated financial statements from the date of acquisition as part of our mammography business segment. The acquisition also provides for a two-year earn out. The earn-out is payable in two annual cash installments equal to the incremental revenue growth in Suros business in the two years following the closing.
On October 22, 2007 we completed the merger with Cytyc Corporation pursuant to Agreement and Plan of Merger entered into on May 20, 2007. Under the terms and conditions of the Merger Agreement, at the effective time of the merger, each share of common stock of Cytyc, issued and outstanding immediately prior to the closing was cancelled and converted into the right to receive (i) 0.52 shares of common stock of Hologic and (ii) $16.50 in cash. The purchase price for the transaction, exclusive of certain merger-related costs and expenses, in the aggregate is approximately $6.2 billion. As of September 29, 2007, we capitalized a total of $6.4 million of direct acquisitions costs, which are included in other long term assets in the accompanying Consolidated Balance Sheet. Cytyc, headquartered in Marlborough, Massachusetts, is a diversified diagnostic and medical device company that designs, develops, manufactures, and markets innovative and clinically effective diagnostic and surgical products. Cytyc products cover a range of cancer and womens health applications, including cervical cancer screening, treatment of excessive menstrual bleeding, radiation treatment of early-stage breast cancer, and the assessment of the risk of pre-term birth. The estimated aggregate purchase price of approximately $6.2 billion includes $2.1 billion in cash, 67,300,000 shares of Hologic common stock at an estimated fair value of $3.7 billion; approximately 8.2 million of fully vested stock options granted to Cytyc employees at an estimated fair value of approximately $246 million; and approximately $41.7 million of direct acquisition costs. There are no potential contingent consideration payable to the former Cytyc shareholders in connection with this transaction.
Subsequent to the Cytyc merger, the Company decided to discontinue the development of Cytycs Helica product. The Company will not realize any future cash flows from this product. The Companys intangible asset valuation for Cytyc included approximately $2,900 related to customer relationships for Helica. As a result of the Helica product discontinuation, the Company recorded an impairment charge, as a component of its GYN Surgical segment, of $2,900 in the first quarter of fiscal 2008.
On August 1, 2012, pursuant to the terms of the Agreement and Plan of Merger, dated April 29, 2012, referred to as the merger agreement, we completed our acquisition of Gen-Probe. Under the terms and conditions of the merger agreement, at the effective time and as a result of the acquisition, each share of common stock of Gen-Probe issued and outstanding immediately prior to the effective time of the acquisition was cancelled and converted into the right to receive $82.75 in cash. In addition, all outstanding restricted shares, restricted stock units, and performance shares and all stock options granted prior to February 8, 2012 were cancelled and converted into the merger consideration based upon an $82.75 per share price. Stock options granted after February 8, 2012 were cancelled and converted into stock options to acquire shares of Hologic common stock determined by a conversion formula defined in the merger agreement. The total purchase price was approximately $3.97 billion, which was funded through available cash and financing consisting of senior secured credit facilities and Senior Notes.
During the fourth quarter of fiscal 2013, in connection with our Company-wide annual budgeting and forecasting process and a full re-evaluation of our existing product development efforts and cost structure, we reduced our short term and long term revenue forecasts and determined that indicators of impairment existed in our Molecular Diagnostics reporting unit, which is in our Diagnostics segment. The Molecular Diagnostics reporting unit is primarily comprised of our Aptima business acquired in the Gen-Probe acquisition in fiscal 2012 and the molecular diagnostics business acquired in the Third Wave acquisition in fiscal 2008. The updated forecast, which reflects recent pricing pressures, is now lower, and the current projections for revenue and profitability are lower than those expected at the time of the Gen-Probe acquisition. As such, the fair value of this reporting unit declined. As a result of performing Step 2 of the goodwill impairment test, which requires the completion of a hypothetical purchase price allocation to determine the fair value of the implied goodwill, we recorded a $1.1 billion goodwill impairment charge.
On March 22, 2017, the Company completed the acquisition of Cynosure and acquired all of the outstanding shares of Cynosure, except for 1.2 million shares that dissented and are pursuing appraisal rights. Pursuant to the terms and conditions of the merger agreement, each share of common stock of Cynosure outstanding immediately prior to the effective time of the acquisition was canceled and converted into the right to receive $66.00 in cash, except for the dissenting shares. In addition, all outstanding restricted stock units, performance stock units, and stock options were canceled and converted into the right to receive $66.00 per share in cash less the applicable exercise price, as applicable. The acquisition was funded through available cash, and the Company paid $1.51 billion to Cynosure shareholders and $64.1 million to employee equity award holders. The amount allocated to the dissenting shareholders of $79.2 million has been recorded as a liability. The Company incurred approximately $18.5 million of transaction costs, which were recorded within general and administrative expenses in the second quarter of fiscal 2017. Cynosure, headquartered in Westford, Massachusetts, develops, manufactures, and markets aesthetic treatment systems that enable plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve womens health. Cynosure also markets radiofrequency (RF) energy-sourced medical devices for precision surgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures, ophthalmology, oral and maxillofacial surgery, podiatry and proctology. Cynosure's results of operations are reported in the Company's Medical Aesthetics reportable segment from the date of acquisition and the goodwill within this reportable segment is solely related to Cynosure.