HOLX - Valens Credit Report - 2022 03 22
Cash bond markets are overstating HOLX's credit risk with a YTW of 4.063%, relative to an Intrinsic YTW of 3.083% and an Intrinsic CDS of 117bps. Furthermore, Moody's is overstating the company's fundamental credit risk, with its speculative Ba1 credit rating two notches lower than Valens' IG4 (Baa2) credit rating.Incentive Dictate Behavior™ analysis highlights mostly positive signals for creditors. HOLX's compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward.
Valens' qualitative analysis of the firm's Q1 2022 earnings call highlights that management is confident nearly 90% of U.S. COVID customers are running at least one other assay and that their vaginitis panel will be their most successful diagnostic launch ever, aside from COVID. Furthermore, they are confident they finished the year with non-GAAP net income and non-GAAP earnings per share that were significantly above prior top-end guidance expectations, and that expected EPS for the second quarter will land 36% above current consensus estimates.
Hologic is a developer, manufacturer and supplier of diagnostics products, medical imaging systems, surgical products and light-based aesthetic and medical treatment systems. The company's segments are: Diagnostics, which provides diagnostic products which are used to aid in the diagnosis of human diseases; Breast Health, which provides solutions for breast cancer care for radiology, pathology and surgery; Medical Aesthetics, which provides aesthetic treatment systems, including SculpSure, PicoSure and MonaLisa Touch; GYN Surgical, which includes NovaSure Endometrial Ablation System to treat abnormal uterine bleeding; and Skeletal Health, which includes the Horizon DXA, a dual energy x-ray system.
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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