What Is Boston Scientific’s Latest Valuation?



Peer comparison

On September 27, 2016, Boston Scientific (BSX) was trading at a forward PE (price-to-earnings) ratio of ~21.5x. Over the last 12 months, the company’s forward PE ratio has been in the range of 12.7x–18.6x. Forward PE is a measure of a company’s growth potential. It’s calculated as the current share price of the company divided by its next-12-month earnings estimate.

Currently, Boston Scientific is trading at a premium compared to its peers Medtronic (MDT), St. Jude Medical (STJ), and Zimmer-Biomet Holdings (ZBH), which are trading at forward PE ratios of 18.7x, 19.7x, and 15.9x, respectively.

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Company fundamentals

In 2Q16, Boston Scientific reported a revenue increase of ~15% on a YoY (year-over-year) basis. Currency headwinds impacted its revenues by approximately $24 million. All the segments of the company registered sales growth, and five out of its seven business segments reported strong double-digit growth. The company’s earnings improved in the quarter, driven by revenue growth and a decrease in SG&A (selling, general and administrative) expenses.

In 2Q16, Boston Scientific revived its top line and bottom line through its cost optimization and reorganization initiatives. The company has a strong product portfolio with expanding operating margins.

For 2016, Boston Scientific expects to achieve operating margins of approximately 24% to 24.5%. The company views electrophysiology and neuromodulation as potential growth segments in the near future. A number of tuck-in acquisitions undertaken by the company are also expected to yield growth in sales and profitability. For a detailed discussion of Boston Scientific’s fundamentals and growth drivers, read Exploring Boston Scientific’s Valuation, Growth Drivers, and More.

Investors interested in exposure to Boston Scientific can consider investing in the First Trust Health Care AlphaDEX Fund (FXH), which has ~2.1% of its total holdings in Boston Scientific.

In the final part of this series, we’ll discuss the company’s latest analyst recommendations.


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