Summary
- The Company's regular use one-time charges due to acquisitions and litigation gives it a high price-to-earnings multiple based on unadjusted earnings.
- In April, the FDA ordered the Company to stop selling surgical mesh product; 2019 revenue and earnings guidance will be lowered.
- With shares trading at ~30 times 2019 unadjusted estimates, I would argue they are fully valued. If the Company misses earnings, the share price could tumble.
If you call a dog’s tail a leg, how many legs does it have? Answer: Four, because calling a tail a leg doesn’t make it one.
- Abraham Lincoln
Boston Scientific Corp. (BSX) is a manufacturer and marketer of medical devices. Since the Company’s formation in the late 1960s, growth has increased substantially through internal development and acquisitions. This growth has buyers bidding up shares based on adjusted earnings. Without the Company paying a dividend, the share price is completely dependent on earnings. With possible additional one-time charges on the horizon because of surgical mesh products, I would suggest waiting for a pullback before investing.
Since 2014, the share price has risen nearly four-fold, driven by rising revenues and earnings:
