Danaher Is Down 22% This Year. Is the Masimo Acquisition the Entry Point Investors Have Been Waiting for?

Danaher (NYSE: DHR) focuses on life sciences, diagnostics, and industrial solutions for healthcare and sells specialized equipment, software, consumables, and reagents used by pharmaceutical companies, scientific research labs, and hospitals.

The healthcare company's stock has fallen more than 22% so far this year. That's mostly due to the company's $9.9 billion acquisition of Masimo, which takes Danaher beyond its core competency in life sciences consumables and into clinical patient monitoring. The new deal raised concerns about a patent dispute with Apple (NASDAQ: AAPL) and led to significant debt.

Two reasons to like the stock and one not to:

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The deal provides more potential growth

Masimo is a leader in non-invasive patient monitoring, particularly SET pulse oximetry, which provides readings of pulse and oxygen levels, as well as sensing technologies equipped with artificial intelligence (AI). Using these as part of Danaher's existing acute care framework allows the company to capture data at the hospital bedside, where diagnostics and immediate clinical decision-making intersect.

In the first quarter, Danaher reported revenue of $5.95 billion, up 3% year over year, and earnings per share (EPS) of $1.45, up 9.8% year over year.

Danaher says the Masimo deal will add $0.15 to $0.20 to adjusted diluted EPS in the first full year of ownership, scaling to $0.70 per share by the fifth year. Danaher felt good enough about the deal and its own finances that it raised its 2026 guidance for adjusted EPS to a range of $8.35 to $8.55.

The company is already in the midst of a comeback

The company, in its first-quarter earnings call, said it was seeing 30% year-over-year growth in equipment orders, the first sign of a multiyear manufacturing investment cycle, helped along by reshoring trends. Part of that is due to renewed interest in the life sciences industry.

In the first quarter of 2026, U.S. pharma and life sciences mergers and acquisitions totaled more than $65 billion, nearly doubling the first-quarter 2025 total and marking the strongest single quarter for industry transactions since the pandemic highs of 2020. Large pharmaceutical companies, facing patent cliffs for some of their top therapies, are looking elsewhere to improve their pipelines. That means more life sciences companies can invest in equipment, benefiting Danaher.

The stock, after its tumble this year, is trading at a little more than 20 times forward earnings, well below its typical valuation over the past decade.

There are still questions

Absorbing a company with a different product lineup poses a giant execution risk for Danaher. The company is known for its efficient management, but investors want to see how well it integrates Masimo before paying more for the stock. Masimo is also in a patent infringement fight with Apple over whether Apple used Masimo's blood-sensoring tech without permission.

The life sciences rally could be easily derailed for several reasons, including a decline in healthcare spending in China, potential disruption from AI, and higher interest rates.

Still, the stock is trading well below its potential, and if the company's management can absorb Masimo with the cost efficiencies it is known for, the stock may be a steal at its current price.

James Halley has positions in Apple. The Motley Fool has positions in and recommends Apple and Danaher. The Motley Fool has a disclosure policy.