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Valens Research

BSX - Embedded Expectations Analysis - 2022 03 08

Boston Scientific (BSX) currently trades near corporate but below historical averages relative to Uniform earnings, with a 25.5x Uniform P/E (Fwd. V/E').

At these levels, markets are pricing in expectations for Uniform ROA to remain stable at 27% levels, accompanied by 5% Uniform asset growth.

Meanwhile, analysts expect Uniform ROA to improve to 29% in 2023, accompanied by 3% Uniform asset growth.

If sustained going forward, these levels would imply a stock price closer to $44, representing approximately immaterial equity downside for the firm.

Moreover, the firm's most recent earnings call suggests management may have concerns about profitability and revenue.
Underlying
BOSTON SCIENTIFIC CORPORATION

Boston Scientific develops, manufactures and markets medical devices. The company's Medical Surgical segment consist of: Endoscopy, which develops and manufactures devices to diagnose and treat a range of gastrointestinal and pulmonary conditions; and Urology and Pelvic Health, which develops and manufactures devices to treat various urological and pelvic conditions. The company's Rhythm and Neuro segment includes: Cardiac Rhythm Management, which develops and manufactures implantable devices to treat cardiac abnormalities; and Electrophysiology, which develops and manufactures medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart.

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Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

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