Danaher Corporation (DHR)

Conclusion

Danaher Corporation is a US healthcare company that designs, makes and sells instruments, consumables and services for biotechnology, life sciences and diagnostics customers. At a price of 235.12 USD on 2026-11-09, its market capitalisation is 165.3 billion USD and its enterprise value is 186.1 billion USD.

The verdict is overvalued. The P/E of 38.2 sits 11.4% above its ten-year median of 34.2, and EV/EBITDA of 26.3 sits 17.9% above its median of 22.3. The DCF gives 143.50 USD per share at a discount rate of 8.89%. The fair value band runs from 148.06 to 222.09 USD with a midpoint of 185.07 USD, a margin of safety of -21.3% at the current price. The reverse DCF implies growth of 11.2% a year, while revenue grew 2.0% a year over five years and free cash flow per share fell 0.4% a year over the same period.

The strongest numbers are free cash flow conversion of 132.2% on a trailing twelve-month basis, an Altman Z-score of 3.77 and interest coverage of 14.4. The weakest are ROIC of 5.9% against a WACC of 8.2%, earnings per share falling at a compound 19.6% over three years, and net debt to EBITDA of 2.9. If the business does not return to growth, the premium in the multiples has little support from the cash the company generates.

Financial health

The financial strength is green, held up by the Altman Z-score of 3.77, interest coverage of 14.4 and a current ratio of 1.63. The quick ratio is 1.19 and debt to equity is 0.49. Net debt to EBITDA of 2.9 is neutral, not a weakness on its own. The Altman model was designed for manufacturers, and Danaher is largely a manufacturer, so its zone is a fair guide here; the Altman score places the company in the safe zone. Insolvency risk is low, about 0.1% by the estimate of the Ohlson model over one to two years, based on the balance sheet at 2025-12-31. The company's balance sheet poses no near-term solvency concern on these measures.

Earnings quality

The earnings quality is green, supported by free cash flow conversion of 132.2% on a trailing basis and 118.8% over five years. The accrual ratio of -3.5% means cash earnings exceed reported earnings. Stock-based compensation is 1.6% of revenue, and free cash flow after it is 5.3 billion USD. The share count fell at a compound 0.2% a year over five years, so buybacks have slightly reduced dilution. The Piotroski score is 6 out of 9. The Beneish M-score is not available. Danaher beat earnings estimates in 7 of the last 8 quarters, with an average surprise of 7.1%. Current-year estimates rose 1.0% over 90 days with 23 upward revisions and none down in 30 days, while next-year estimates rose 0.3% with 15 up and 7 down.

Profitability

The profitability is yellow, because return on invested capital is below the cost of capital. Gross margin is 58.6% against a ten-year median of 57.4%, operating margin is 20.4% against 20.1%, and net margin is 16.9% against 15.9%. Operating margin stability is 17.5%. ROIC is 5.9% against a WACC of 8.2%, giving a ROIC minus WACC value of -2.3%, so the company is not currently earning its cost of capital. The five-year median ROIC is 6.6%. Return on equity is 8.1%. The DuPont split for 2025 shows a net margin of 14.7%, an asset turnover of 0.29 and an equity multiplier of 1.59, so leverage adds only modestly to the return on equity, which is low for a company with these margins.

Growth

The growth is yellow, because revenue and earnings growth are weak over the recent past. Revenue compounded at -2.7% over three years, 2.0% over five years and 5.5% over ten years. Earnings per share compounded at -19.6% over three years, 0.0% over five years and 3.3% over ten years. Free cash flow per share compounded at -9.5% over three years, -0.4% over five years and 4.8% over ten years. Revenue grew in 6 of the last 10 years. Next year's estimated earnings growth is 8.5%, which is the main support for a return to growth, but it has not yet appeared in the reported numbers.

Valuation

The valuation is red. The P/E is 38.2 against a ten-year median of 34.2, a premium of 11.4%. EV/EBITDA is 26.3 against 22.3, a premium of 17.9%. Price to free cash flow is 28.9 against 27.8, a premium of 3.7%. Price to sales is 6.5 against 6.5, a discount of 0.5%, and price to book is 3.1 against 3.2, a discount of 5.1%. The DCF gives 143.50 USD per share at a discount rate of 8.89%, with 56.4% of the value in the terminal value. The fair value from historical multiples is 226.64 USD. The reverse DCF implies growth of 11.2% a year. The dividend yield is 0.6% and the payout on free cash flow is 17.7%, so the dividend is well covered.

Risks

The main risk is that the company does not return to the growth the price implies. Revenue compounding at 2.0% over five years against an implied 11.2% leaves a large gap to close. Return on invested capital below the cost of capital means each unit of new investment adds less value than it costs, and the 3.0% decline in EPS over three years would continue if margins or revenue do not recover. Net debt to EBITDA of 2.9 limits flexibility if earnings fall. About 56% of the DCF value comes from the terminal value, so the DCF estimate is sensitive to long-term assumptions. The Beneish M-score is not available. This analysis does not include a debt maturity schedule or revenue by segment, so it cannot judge refinancing timing or which businesses drive growth.