The BSX share value has experienced a robust 55% surge from the $35 mark at the start of January 2021 to approximately $55 presently, in contrast to a roughly 15% gain for the S&P 500 over this nearly 3-year period. While BSX is one of a small number of stocks that have appreciated in value each of the past three years, it still fell short of consistently outperforming the market. The stock delivered returns of 18% in 2021, 9% in 2022, and 14% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 14% in 2023 – indicating that BSX lags behind the S&P in 2021.
In fact, Consistently outperforming the S&P 500 individual stocks have faced challenges in recent years, irrespective of favorable or unfavorable conditions; including healthcare giants such as LLY, UNH, and JNJ, and even large-cap standouts like GOOG, TSLA, and MSFT. In contrast, the Trefis High-Quality Portfolio comprises 30 stocks. Outperformed the S&P 500 every year at the same time. For what reason? As a collective, HQ Portfolio stocks delivered superior returns with lower risk compared to the benchmark index, with a less tumultuous journey, as evidenced in the HQ Portfolio’s performance metrics.
Given the current uncertain macroeconomic environment with soaring oil prices and elevated interest rates, could BSX encounter a situation analogous to 2021 and the S&P’s performance is lackluster over the next 12 months – or will a substantial surge be observed? From a valuation standpoint, BSX share value appears to have limited growth potential. We estimate Boston Scientific’s valuation to be $58 per share, which is only 10% higher than the current level of $53. This conveys a 29x P/E multiple for BSX based on anticipated adjusted earnings of $2.00 per share in 2023. The 29x P/E ratio is also consistent with the average over the last four years for BSX.
Boston Scientific’s third-quarter revenue of $3.5 billion surged 11% compared to the previous year, primarily driven by a 12% increase in the cardiovascular segment and an 11% rise in MedSurg sales. Boston Scientific’s acquisition of Apollo Endosurgery and majority stake in Ecotec has bolstered its top-line growth, a trend expected to persist. The company anticipates full-year sales in 2023 to reach about $14.1 billion, representing an 11% increase year-over-year.
Boston Scientific’s operating margin expanded by over 300 bps in the third quarter to 29%. Increased revenue and margin expansion translated into adjusted earnings of $0.50 per share, a 16% jump from the previous year. The company raised its earnings forecast to a range of $1.99 and $2.02 from its previous guidance of $1.96 to $2.00.
Looking ahead, the company is poised to benefit from new product launches, including POLARx (Japan), Versys, and XL valves. Moreover, its recent acquisitions such as Bayliss and Apollo will also fortify its top-line growth. Its majority stake in Ecotec will likely bolster its future sales growth in China. Nonetheless, most of the positive valuations for Boston Scientific seem to have been accounted for. It currently trades at 5.7x sales, close to its average over the last five years of 5.9x.
While BSX share value seems to have little potential for growth, it would be beneficial to examine the performance of Boston Scientific Peers with regard to these metrics.
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