How Abbott’s Medical Device Advances Are Shaping Its 2025 Valuation Debate

• Wondering if Abbott Laboratories is delivering real value for its current price? You are not alone. The stock often sits high on watchlists for investors assessing whether it is truly worth a spot in their portfolios.
• The share price has seen a solid 13.3% climb year-to-date and is up 10.1% over the last year, hinting at renewed optimism in the market or shifting risk perceptions around the business.
• Market chatter has ramped up alongside headlines spotlighting Abbott's advancements in medical devices and diagnostic technology. Both are frequent drivers of renewed investor interest. Alongside positive regulatory developments, these news items help explain why the stock has been on the move recently.
• According to our checks, Abbott Laboratories has a valuation score of 3 out of 6, meaning it appears undervalued in half of the key metrics we review. Next, we will take a closer look at how Abbott stacks up under standard valuation models. Stay tuned for an even more dynamic approach you will want to see before making your own call.

Abbott Laboratories delivered 10.1% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.

Approach 1: Abbott Laboratories Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by projecting Abbott Laboratories' expected future cash flows and then discounting those amounts back to today's value using a required rate of return. This helps estimate what the entire business might be worth based on its ability to generate cash in the years ahead.

Currently, Abbott Laboratories generates free cash flow of $6.84 billion. Analyst forecasts suggest that annual free cash flow will climb to $8.42 billion by 2029. Precise analyst estimates only cover the next five years; cash flows beyond this are extrapolated, and projections continue to show steady growth in the company's earning power in the Medical Equipment sector.

Using the 2 Stage Free Cash Flow to Equity model, Abbott Laboratories’ estimated intrinsic value comes out to $72.89 per share. This is significantly below the recent share price, and the analysis indicates the stock is 76.3% overvalued.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Abbott Laboratories may be overvalued by 76.3%. Discover 928 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Abbott Laboratories.

Approach 2: Abbott Laboratories Price vs Earnings

The price-to-earnings (PE) ratio is a popular valuation metric for profitable companies like Abbott Laboratories because it enables investors to compare the company’s current share price relative to its earnings and gauge how the market values its future growth prospects.

A "normal" or "fair" PE ratio depends heavily on growth expectations and perceived risks. Higher growth companies or those with more stable earnings usually command higher multiples, while added risks or lower profitability can suppress PE ratios for the sector or peers.

Abbott Laboratories currently trades at a PE ratio of 16x. Compared to the Medical Equipment industry’s average of 29x and a peer average of 51x, Abbott appears attractively priced by conventional benchmarks. However, Simply Wall St’s proprietary “Fair Ratio” provides a more comprehensive comparison by considering earnings growth, industry context, profit margin, market cap, and specific company risks. In this case, Abbott’s Fair Ratio is 25x, which reflects what would be expected for a company with its financial profile and operating environment.

Unlike a simple peer comparison, the Fair Ratio acknowledges the bigger picture. This allows investors to judge value with extra confidence. Because Abbott’s actual PE ratio (16x) is noticeably below its Fair Ratio (25x), the stock looks undervalued using this approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Abbott Laboratories Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives allow you to combine your perspective on Abbott Laboratories with future assumptions, incorporating your story behind the numbers, to craft a tailored view of fair value based on expected revenue, profit margins, and growth rates.

Instead of just crunching data, Narratives connect what is happening in the business, such as new product launches or changes in global demand, to financial forecasts and a fair value that you can easily compare to the current share price. Narratives are available on Simply Wall St’s Community page, making it simple for any investor to pick or build a story that reflects their outlook.

This approach helps you decide how your fair value stacks up against the market and is updated automatically as news or results come in, so your view is always current. For example, some investors may be optimistic and set a Narrative fair value above $159 per share, expecting robust growth from emerging markets and successful pipeline launches, while others are more cautious with estimates as conservative as $122 if they see greater risks and headwinds ahead.

Do you think there's more to the story for Abbott Laboratories? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com