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Topic: Growth Stocks

AGILENT TECHNOLOGIES INC. $36 – New York symbol A

AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 346.0 million; Market cap: $12.5 billion; Price-to-sales ratio: 2.3; No dividends paid; TSINetwork Rating: Average; www.agilent.com) makes testing systems that help improve electronic products, such as cellphones and networking equipment.

In May 2010, Agilent bought Varian Inc. for $1.5 billion. Varian makes a wide range of medical and drug-testing equipment, such as mass spectrometers that detect and measure substances in blood and other samples. Medical-equipment demand is less cyclical than testing products, so this move cuts Agilent’s risk.

Thanks to Varian, Agilent earned $706 million, or $2.00 a share, in the year ended October 31, 2010. That’s up 152.1% from $280 million, or $0.80 a share, in fiscal 2009. These figures exclude costs to integrate the new operations. Revenue rose 21.5%, to $5.4 billion from $4.5 billion. The company spends around 11% of its revenue on research.

Agilent had to borrow the money it needed to buy Varian. That pushed its total debt up to $3.7 billion, from $2.9 billion at the end of fiscal 2009. Despite the rise, Agilent’s debt is still a moderate 30% of its market cap. The company also holds cash of $4.2 billion, or $12.14 a share.

Agilent should earn $2.44 a share in fiscal 2011. The stock trades at 14.8 times that figure. That’s a low p/e ratio in light of the new products that should result from its research spending.

Agilent is a buy.

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