Over the past six months, Agilent’s stock price fell to $118.28. Shareholders have lost 16.7% of their capital, which is disappointing considering the S&P 500 has climbed by 5.4%. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Agilent, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Agilent Not Exciting?

Despite the more favorable entry price, we're swiping left on Agilent for now. Here are three reasons there are better opportunities than A and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Agilent’s 5% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector.

2. Slow Organic Growth Suggests Waning Demand In Core Business

We can better understand Research Tools & Consumables companies by analyzing their organic revenue. This metric gives visibility into Agilent’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Agilent’s organic revenue averaged 4.2% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

3. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Agilent’s margin dropped by 5.8 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Agilent’s free cash flow margin for the trailing 12 months was 14.1%.

Final Judgment

Agilent isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 19.5× forward P/E (or $118.28 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the most dominant software business in the world.

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