Boston Scientific Corporation Valuation – March 2019 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $56,533,391,248 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.76 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -185.15% Fail
6. Moderate PEmg Ratio PEmg < 20 46.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.76 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.87
MG Growth Estimate 15.00%
MG Value $33.42
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $12.59
MG Value based on 0% Growth $7.38
Market Implied Growth Rate 19.25%
Current Price $40.79
% of Intrinsic Value 122.06%

Boston Scientific Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.47 in 2015 to an estimated $0.87 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.25% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Boston Scientific Corporation revealed the company was trading above its Graham Number of $14.78. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 46.99, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.88.

Boston Scientific Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.88
Graham Number $14.78
PEmg 46.99
Current Ratio 0.76
PB Ratio 6.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,003,000,000
Total Current Liabilities $5,260,000,000
Long-Term Debt $4,797,000,000
Total Assets $20,999,000,000
Intangible Assets $14,283,000,000
Total Liabilities $12,273,000,000
Shares Outstanding (Diluted Average) 1,406,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.54
Dec2018 $1.19
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.87
Dec2018 $0.44
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Boston Scientific Corp Valuation – May 2018 $BSX
Most Overvalued Stocks of the S&P 500 – March 2017
Boston Scientific Corp Valuation – January 2017 $BSX
Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14

Other ModernGraham posts about related companies

Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX
IQVIA Holdings Inc Valuation – February 2019 $IQV
Thermo Fisher Scientific Inc Valuation – February 2019 $TMO
Illumina Inc Valuation – February 2019 $ILMN
Waters Corp Valuation – February 2019 $WAT
Cerner Corp Valuation – February 2019 $CERN
HCA Healthcare Inc Valuation – February 2019 $HCA
Stryker Corp Valuation – February 2019 $SYK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Boston Scientific Corp Valuation – May 2018 $BSX

Company Profile (excerpt from Reuters): Boston Scientific Corporation, incorporated on June 22, 1979, is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and Peripheral Interventions businesses. Rhythm Management consists of Cardiac Rhythm Management and Electrophysiology businesses. MedSurg consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. It sells ACURATE TA and ACURATE neo /TF valve systems in Europe and in other geographies outside of the United States.

BSX Chart

BSX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,311,529,905 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -255.96% Fail
6. Moderate PEmg Ratio PEmg < 20 59.90 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.29 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.50
MG Growth Estimate 15.00%
MG Value $19.17
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $7.22
MG Value based on 0% Growth $4.23
Market Implied Growth Rate 25.70%
Current Price $29.83
% of Intrinsic Value 155.58%

Boston Scientific Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.64 in 2014 to an estimated $0.5 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Boston Scientific Corporation revealed the company was trading above its Graham Number of $12.54. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 59.9, which was above the industry average of 42.49. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.79.

Boston Scientific Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.79
Graham Number $12.54
PEmg 59.90
Current Ratio 0.82
PB Ratio 5.93
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,080,000,000
Total Current Liabilities $4,988,000,000
Long-Term Debt $4,802,000,000
Total Assets $19,202,000,000
Intangible Assets $12,698,000,000
Total Liabilities $12,172,000,000
Shares Outstanding (Diluted Average) 1,396,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $0.08
Dec2016 $0.25
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45
Dec1998 -$0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.50
Dec2017 $0.04
Dec2016 -$0.19
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Boston Scientific Corp Valuation – January 2017 $BSX
Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14
Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

Other ModernGraham posts about related companies

Centene Corp Valuation – May 2018 $CNC
Abbott Laboratories Valuation – May 2018 $ABT
Becton Dickinson and Co Valuation – May 2018 $BDX
IQVIA Holdings Inc Valuation – Initial Coverage May 2018 $IQV
Thermo Fisher Scientific Inc Valuation – April 2018 $TMO
Illumina Inc Valuation – April 2018 $ILMN
Waters Corp Valuation – April 2018 $WAT
Align Technology Inc Valuation – April 2018 $ALGN
HCA Healthcare Inc Valuation – April 2018 $HCA
Express Scripts Holding Co Valuation – April 2018 $ESRX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Boston Scientific Corp Valuation – January 2017 $BSX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Boston Scientific Corp (BSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Boston Scientific Corporation is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company offers its products by seven core businesses: Interventional Cardiology, Peripheral Interventions (PI), Cardiac Rhythm Management (CRM), Electrophysiology (EP), Endoscopy, Urology and Pelvic Health, and Neuromodulation. It operates in three segments: Cardiovascular, Rhythm Management and MedSurg. Its Cardiovascular segment consists of Interventional Cardiology and PI businesses. Its Rhythm Management segment consists of CRM and EP businesses. Its MedSurg segment consists of Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. Its interventional cardiology products include Drug-Eluting Coronary Stent Systems, Core Coronary Technology, Intravascular Imaging and Structural Heart Therapy. Its peripheral products include stents, balloon catheters, wires, peripheral embolization devices and vena cava filters.

BSX Chart

BSX data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $32,323,259,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.05 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -107.59% Fail
6. Moderate PEmg Ratio PEmg < 20 -198.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.09 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.05 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 31.34 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg -$0.12
MG Growth Estimate 13.50%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$1.75
MG Value based on 0% Growth -$1.03
Market Implied Growth Rate -103.28%
Current Price $23.90
% of Intrinsic Value N/A

Boston Scientific Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-1.21 in 2012 to an estimated $-0.12 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Boston Scientific Corporation revealed the company was trading above its Graham Number of $6.94. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -198.07, which was below the industry average of 32.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.82.

Boston Scientific Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.82
Graham Number $6.94
PEmg -198.07
Current Ratio 1.05
PB Ratio 5.09
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $3,181,000,000
Total Current Liabilities $3,016,000,000
Long-Term Debt $5,171,000,000
Total Assets $17,697,000,000
Intangible Assets $12,336,000,000
Total Liabilities $11,215,000,000
Shares Outstanding (Diluted Average) 1,379,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.45
Dec2015 -$0.18
Dec2014 -$0.09
Dec2013 -$0.09
Dec2012 -$2.89
Dec2011 $0.29
Dec2010 -$0.70
Dec2009 -$0.68
Dec2008 -$1.36
Dec2007 -$0.33
Dec2006 -$2.81
Dec2005 $0.75
Dec2004 $1.24
Dec2003 $0.56
Dec2002 $0.45
Dec2001 -$0.07
Dec2000 $0.46
Dec1999 $0.45
Dec1998 -$0.34
Dec1997 $0.14
Dec1996 $0.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.12
Dec2015 -$0.47
Dec2014 -$0.64
Dec2013 -$0.88
Dec2012 -$1.21
Dec2011 -$0.43
Dec2010 -$0.92
Dec2009 -$0.98
Dec2008 -$0.92
Dec2007 -$0.51
Dec2006 -$0.38
Dec2005 $0.75
Dec2004 $0.67
Dec2003 $0.38
Dec2002 $0.26
Dec2001 $0.15
Dec2000 $0.24

Recommended Reading:

Other ModernGraham posts about the company

Boston Scientific Inc. Analysis – September 2015 Update $BSX
23 Companies to Research This Week – 9/13/14
Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

Other ModernGraham posts about related companies

Centene Corp Valuation – Initial Coverage $CNC
Invacare Corporation Valuation – Initial Coverage $IVC
Becton Dickinson and Co Valuation – January 2017 $BDX
Select Medical Holdings Corp Valuation – Initial Coverage $SEM
Chemed Corporation Valuation – Initial Coverage $CHE
Inogen Inc Valuation – Initial Coverage $INGN
Surgical Care Affiliates Inc Valuation – Initial Coverage $SCAI
Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
Illumina Inc Valuation – Initial Coverage $ILMN
Thermo Fisher Scientific Inc Valuation – November 2016 $TMO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Boston Scientific Inc. Analysis – September 2015 Update $BSX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Boston Scientific Inc. (BSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Boston Scientific Corporation develops, manufactures and markets medical devices. The Company offers its products by seven core businesses: Interventional Cardiology, which includes Drug-Eluting Coronary Stent Systems, Intravascular Imaging devised and Coronary Technology products, such as guide wires, guide catheters, and balloon catheters, among others; Peripheral Interventions (PI), which include stents, balloon catheters, wires, peripheral embolization devices and vena cava filters; Cardiac Rhythm Management (CRM), which include implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities; Electrophysiology (EP), which include steerable RF ablation catheters, intracardiac ultrasound catheters, diagnostic catheters, delivery sheaths, and other accessories; Endoscopy, which includes Spyglass System, WallFlex Colonic Stents, Resolution Clip, and Expect Aspiration Needle, among others; Urology and Women’s Health, and Neuromodulation.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of BSX – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BSX value Chart September 2015

EPSmg -$0.23
MG Growth Estimate 6.91%
MG Value $0.00
Opinion Overvalued
MG Value based on 3% Growth -$3.36
MG Value based on 0% Growth -$1.97
Market Implied Growth Rate -40.49%
Current Price $16.79
% of Intrinsic Value N/A

Boston Scientific Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, the lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets, lack of earnings stability over the last five years and the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $0.43 in 2011 to an estimated loss of only $0.23 for 2015.  This level of demonstrated earnings growth does not support a positive valuation as the company is continuing to lose money.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Boston Scientific Inc. (BSX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

BSX Charts September 2015

Net Current Asset Value (NCAV) -$4.97
Graham Number $7.64
PEmg -72.47
Current Ratio 1.95
PB Ratio 3.47
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $3,773,000,000
Total Current Liabilities $1,937,000,000
Long-Term Debt $5,069,000,000
Total Assets $17,123,000,000
Intangible Assets $11,372,000,000
Total Liabilities $10,543,000,000
Shares Outstanding (Diluted Average) 1,361,800,000

Earnings Per Share History

Next Fiscal Year Estimate $0.53
Dec14 -$0.09
Dec13 -$0.09
Dec12 -$2.89
Dec11 $0.29
Dec10 -$0.70
Dec09 -$0.68
Dec08 -$1.36
Dec07 -$0.33
Dec06 -$2.81
Dec05 $0.75
Dec04 $1.24
Dec03 $0.56
Dec02 $0.45
Dec01 -$0.07
Dec00 $0.46
Dec99 $0.45
Dec98 -$0.34
Dec97 $0.18
Dec96 $0.23
Dec95 $0.02

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.23
Dec14 -$0.64
Dec13 -$0.88
Dec12 -$1.21
Dec11 -$0.43
Dec10 -$0.92
Dec09 -$0.98
Dec08 -$0.92
Dec07 -$0.51
Dec06 -$0.38
Dec05 $0.75
Dec04 $0.67
Dec03 $0.38
Dec02 $0.26
Dec01 $0.16
Dec00 $0.24
Dec99 $0.13

Recommended Reading:

Other ModernGraham posts about the company

23 Companies to Research This Week – 9/13/14
Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

Other ModernGraham posts about related companies

Intuitive Surgical Inc. Analysis – September 2015 Update $ISRG
Dentsply International Inc. Analysis – August 2015 Update $XRAY
Becton Dickinson & Company Analysis – August 2015 Update $BDX
Align Technology Analysis – Initial Coverage $ALGN
Varian Medical Systems Inc Analysis – August 2015 Update $VAR
Psychemedics Corporation Analysis – August 2015 Update $PMD
C.R. Bard Inc. Analysis – August 2015 Update $BCR
Thermo Fisher Scientific Inc. Analysis – 2015 Update $TMO
Express Scripts Inc. Analysis – 2015 Update $ESRX
HCA Holdings Inc. Analysis – Initial Coverage $HCA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to read our full disclaimer.

 

Boston Scientific Corporation Annual Stock Valuation – 2014 $BSX

215px-BostonscientificlogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Boston Scientific (BSX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Boston Scientific Corporation is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. During the year ended December 31, 2011, its products were offered for sale by seven core businesses: Interventional Cardiology, CRM, Endoscopy, Peripheral Interventions, Urology/Women’s Health, Neuromodulation, and Electrophysiology. In November 2013, the Company announced that it has acquired Bard EP, the electrophysiology (EP) business of C.R. Bard, Inc. In February 2014, Boston Scientific Corp acquired StarMedTec GmbH, a Starnberg-based manufacturer of medical laser systems. Effective May 7, 2014, the Company acquired the remaining 72% interest, which it did not already own, in IoGyn Inc.
BSX Chart

BSX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Balance Sheet – 6/30/2014

Current Assets $3,214,000,000
Current Liabilities $1,773,000,000
Total Debt $4,252,000,000
Total Assets $16,477,000,000
Intangible Assets $11,394,000,000
Total Liabilities $9,933,000,000
Outstanding Shares 1,323,770,000

Earnings Per Share

2014 (estimate) $0.80
2013 -$0.09
2012 -$2.89
2011 $0.29
2010 -$0.70
2009 -$0.68
2008 -$1.36
2007 -$0.33
2006 -$2.81
2005 $0.75
2004 $1.24

Earnings Per Share – ModernGraham

2014 (estimate) -$0.34
2013 -$0.88
2012 -$1.21
2011 -$0.43
2010 -$0.92
2009 -$0.98

Dividend History

Boston Scientific does not pay a dividend.

Conclusion:

Boston Scientific does not qualify for either the Defensive Investor or the Enterprising Investor.  Both investor types have significant concerns relating primarily to the company’s unstable earnings and financial condition.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  As for a valuation, the company appears to be overvalued as the company’s normalized earnings are negative.  This level of earnings does not support a positive valuation and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Boston Scientific Corp (BSX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Boston Scientific Corp (BSX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

McKesson Corp Valuation – March 2019 #MCK

Company Profile (excerpt from Reuters): McKesson Corporation, incorporated on July 7, 1994, is a healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology company. The Company provides medicines, medical products and healthcare services by partnering with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare. It operates through two segments: McKesson Distribution Solutions and McKesson Technology Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCK – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,379,630,473 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 109.07% Pass
6. Moderate PEmg Ratio PEmg < 20 13.60 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.96
MG Growth Estimate 8.57%
MG Value $229.80
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $129.91
MG Value based on 0% Growth $76.15
Market Implied Growth Rate 2.55%
Current Price $121.88
% of Intrinsic Value 53.04%

McKesson Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.7 in 2015 to an estimated $8.96 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into McKesson Corporation revealed the company was trading above its Graham Number of $92.59. The company pays a dividend of $1.3 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 13.6, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-68.22.

McKesson Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$68.22
Graham Number $92.59
PEmg 13.60
Current Ratio 1.02
PB Ratio 2.53
Current Dividend $1.30
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $38,319,000,000
Total Current Liabilities $37,424,000,000
Long-Term Debt $7,616,000,000
Total Assets $61,011,000,000
Intangible Assets $14,439,000,000
Total Liabilities $51,622,000,000
Shares Outstanding (Diluted Average) 195,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.85
Mar2018 $0.32
Mar2017 $22.73
Mar2016 $9.70
Mar2015 $6.27
Mar2014 $5.41
Mar2013 $5.59
Mar2012 $5.59
Mar2011 $4.57
Mar2010 $4.62
Mar2009 $2.95
Mar2008 $3.32
Mar2007 $2.99
Mar2006 $2.38
Mar2005 -$0.53
Mar2004 $2.19
Mar2003 $1.88
Mar2002 $1.43
Mar2001 -$0.17
Mar2000 $2.55
Mar1999 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.96
Mar2018 $9.30
Mar2017 $12.51
Mar2016 $7.11
Mar2015 $5.70
Mar2014 $5.33
Mar2013 $5.08
Mar2012 $4.62
Mar2011 $3.99
Mar2010 $3.55
Mar2009 $2.75
Mar2008 $2.46
Mar2007 $1.94
Mar2006 $1.44
Mar2005 $0.96
Mar2004 $1.66
Mar2003 $1.33

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2018
McKesson Corp Valuation – June 2018 $MCK
McKesson Corp Valuation – August 2017 $MCK
McKesson Corp Valuation – July 2016 $MCK
47 Companies in the Spotlight This Week – 5/16/15

Other ModernGraham posts about related companies

Hologic Inc Valuation – March 2019 #HOLX
Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

IDEXX Laboratories Inc Valuation – March 2019 #IDXX

Company Profile (excerpt from Reuters): IDEXX Laboratories, Inc., incorporated on December 19, 1983, develops, manufactures and distributes products and provides services primarily for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The Company also sells a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Its segments include diagnostic and information technology-based products and services for the veterinary market, which the Company refers to as the Companion Animal Group (CAG); water quality products (Water); diagnostic products and services for livestock and poultry health, which the Company refers to as Livestock, Poultry and Dairy (LPD), and Other operating segment, which combines and presents products for the human point-of-care medical diagnostics market (OPTI Medical) with its pharmaceutical product line and its out-licensing arrangements. Its primary products and services are point-of-care veterinary diagnostic products, comprising instruments, consumables and rapid assay test kits; veterinary reference laboratory diagnostic and consulting services; practice management and diagnostic imaging systems and services used by veterinarians; biological materials testing, laboratory diagnostic instruments and services used by the biomedical research community; diagnostic, health-monitoring products for livestock, poultry and dairy; products that test water for certain microbiological contaminants, and point-of-care electrolytes and blood gas analyzers used in the human point-of-care medical diagnostics market.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IDXX – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,330,932,847 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 185.34% Pass
6. Moderate PEmg Ratio PEmg < 20 60.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -2,138.74 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.17 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.74
MG Growth Estimate 15.00%
MG Value $144.09
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $54.27
MG Value based on 0% Growth $31.81
Market Implied Growth Rate 25.79%
Current Price $224.86
% of Intrinsic Value 156.05%

IDEXX Laboratories, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.81 in 2015 to an estimated $3.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 25.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into IDEXX Laboratories, Inc. revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 60.08, which was above the industry average of 53.13. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.16.

IDEXX Laboratories, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.16
Graham Number $0.00
PEmg 60.08
Current Ratio 0.85
PB Ratio -2,138.74
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $654,172,000
Total Current Liabilities $770,444,000
Long-Term Debt $601,348,000
Total Assets $1,537,349,000
Intangible Assets $256,314,000
Total Liabilities $1,546,582,000
Shares Outstanding (Diluted Average) 87,819,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Dec2018 $4.26
Dec2017 $2.94
Dec2016 $2.44
Dec2015 $2.05
Dec2014 $1.79
Dec2013 $1.74
Dec2012 $1.59
Dec2011 $1.39
Dec2010 $1.19
Dec2009 $1.01
Dec2008 $0.94
Dec2007 $0.73
Dec2006 $0.71
Dec2005 $0.58
Dec2004 $0.55
Dec2003 $0.40
Dec2002 $0.33
Dec2001 $0.27
Dec2000 $0.26
Dec1999 $0.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2018 $3.08
Dec2017 $2.40
Dec2016 $2.06
Dec2015 $1.81
Dec2014 $1.64
Dec2013 $1.51
Dec2012 $1.33
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $0.86
Dec2008 $0.76
Dec2007 $0.65
Dec2006 $0.57
Dec2005 $0.48
Dec2004 $0.41
Dec2003 $0.32

Recommended Reading:

Other ModernGraham posts about the company

IDEXX Laboratories Inc Valuation – June 2018 $IDXX
IDEXX Laboratories Inc Valuation – Initial Coverage $IDXX

Other ModernGraham posts about related companies

Hologic Inc Valuation – March 2019 #HOLX
Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hologic Inc Valuation – March 2019 #HOLX

Company Profile (excerpt from Reuters): Hologic, Inc., incorporated on January 18, 1990, is a developer, manufacturer and supplier of diagnostics products, medical imaging systems and surgical products with an emphasis on women’s health. The Company operates through four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. The Company sells and services its products through a combination of direct sales and service personnel and a network of independent distributors and sales representatives.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOLX – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,730,000,796 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 6528.57% Pass
6. Moderate PEmg Ratio PEmg < 20 33.53 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.36 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.66 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.41
MG Growth Estimate 15.00%
MG Value $54.13
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $20.39
MG Value based on 0% Growth $11.95
Market Implied Growth Rate 12.51%
Current Price $47.14
% of Intrinsic Value 87.09%

Hologic, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $-0.7 in 2015 to an estimated $1.41 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hologic, Inc. revealed the company was trading above its Graham Number of $22.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.53, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.51.

Hologic, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.51
Graham Number $22.04
PEmg 33.53
Current Ratio 1.30
PB Ratio 5.36
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,401,900,000
Total Current Liabilities $1,077,700,000
Long-Term Debt $2,807,900,000
Total Assets $6,931,500,000
Intangible Assets $4,965,100,000
Total Liabilities $4,537,100,000
Shares Outstanding (Diluted Average) 272,372,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.40
Sep2018 -$0.40
Sep2017 $2.64
Sep2016 $1.16
Sep2015 $0.45
Sep2014 $0.06
Sep2013 -$4.36
Sep2012 -$0.28
Sep2011 $0.59
Sep2010 -$0.24
Sep2009 -$8.64
Sep2008 -$1.57
Sep2007 $0.86
Sep2006 $0.28
Sep2005 $0.32
Sep2004 $0.15
Sep2003 $0.04
Sep2002 $0.00
Sep2001 -$0.34
Sep2000 -$0.31
Sep1999 -$0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.41
Sep2018 $0.87
Sep2017 $1.00
Sep2016 -$0.08
Sep2015 -$0.70
Sep2014 -$1.14
Sep2013 -$2.02
Sep2012 -$1.24
Sep2011 -$1.75
Sep2010 -$2.56
Sep2009 -$3.07
Sep2008 -$0.19
Sep2007 $0.45
Sep2006 $0.21
Sep2005 $0.13
Sep2004 -$0.01
Sep2003 -$0.10

Recommended Reading:

Other ModernGraham posts about the company

Hologic Inc Valuation – June 2018 $HOLX
Hologic Inc Valuation – Initial Coverage $HOLX

Other ModernGraham posts about related companies

Mettler-Toledo International Inc Valuation – March 2019 #MTD
DaVita Inc Valuation – March 2019 #DVA
Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Mettler-Toledo International Inc Valuation – March 2019 #MTD

Company Profile (excerpt from Reuters): Mettler-Toledo International Inc., incorporated on December 6, 1991, is a supplier of precision instruments and services. The Company operates through five segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations and Other. The Company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics and food retailing applications. The Company is also a provider of analytical instruments for use in life science, reaction engineering and real-time analytic systems used in drug and chemical compound development, and process analytics instruments used for in-line measurement in production processes. In addition, the Company is also a supplier of end-of-line inspection systems used in production and packaging for food, pharmaceutical and other industries. The Company serves food and beverage producers; food retailers; chemical, specialty chemicals and cosmetics companies, and the transportation and logistics industry, among others.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MTD – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,570,648,912 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.42 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 134.87% Pass
6. Moderate PEmg Ratio PEmg < 20 38.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.42 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.16 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $18.41
MG Growth Estimate 10.18%
MG Value $531.23
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $266.95
MG Value based on 0% Growth $156.49
Market Implied Growth Rate 14.96%
Current Price $707.41
% of Intrinsic Value 133.17%

Mettler-Toledo International Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $10.97 in 2015 to an estimated $18.41 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Mettler-Toledo International Inc. revealed the company was trading above its Graham Number of $109.73. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 38.42, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.56.

Mettler-Toledo International Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$38.56
Graham Number $109.73
PEmg 38.42
Current Ratio 1.42
PB Ratio 30.56
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,045,860,000
Total Current Liabilities $734,434,000
Long-Term Debt $985,021,000
Total Assets $2,618,847,000
Intangible Assets $752,088,000
Total Liabilities $2,028,784,000
Shares Outstanding (Diluted Average) 25,491,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $22.60
Dec2018 $19.88
Dec2017 $14.24
Dec2016 $14.22
Dec2015 $12.48
Dec2014 $11.44
Dec2013 $9.96
Dec2012 $9.14
Dec2011 $8.21
Dec2010 $6.80
Dec2009 $5.03
Dec2008 $5.79
Dec2007 $4.70
Dec2006 $3.86
Dec2005 $2.52
Dec2004 $2.37
Dec2003 $2.11
Dec2002 $2.21
Dec2001 $1.68
Dec2000 $1.66
Dec1999 $1.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $18.41
Dec2018 $15.69
Dec2017 $13.22
Dec2016 $12.29
Dec2015 $10.97
Dec2014 $9.85
Dec2013 $8.64
Dec2012 $7.65
Dec2011 $6.64
Dec2010 $5.65
Dec2009 $4.84
Dec2008 $4.45
Dec2007 $3.56
Dec2006 $2.86
Dec2005 $2.30
Dec2004 $2.13
Dec2003 $1.93

Recommended Reading:

Other ModernGraham posts about the company

Mettler-Toledo International Inc Valuation – June 2018 $MTD
Mettler-Toledo International Inc Valuation – Initial Coverage $MTD

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DaVita Inc Valuation – March 2019 #DVA
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

DaVita Inc Valuation – March 2019 #DVA

Company Profile (excerpt from Reuters): DaVita Inc., formerly DaVita HealthCare Partners Inc., incorporated on April 4, 1994, operates two divisions: DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division consists of the Company’s the United States dialysis and related lab services, its ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. Its DMG division is a patient- and physician-focused integrated healthcare delivery and management company that provides medical services to members primarily through capitation contracts with some of the nation’s health plans. The Company’s segments include U.S. dialysis and related lab services, DMG, and Other-Ancillary services and strategic initiatives. Its U.S. dialysis and related lab services line of business provide kidney dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). In addition, as of December 31, 2016, the Company operated or provided administrative services to 154 outpatient dialysis centers serving patients located in 11 countries outside of the United States.

Downloadable PDF version of this valuation:

ModernGraham Valuation of DVA – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,919,039,746 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 17.39% Fail
6. Moderate PEmg Ratio PEmg < 20 18.25 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.29 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.72 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.94
MG Growth Estimate 3.21%
MG Value $43.95
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $42.70
MG Value based on 0% Growth $25.03
Market Implied Growth Rate 4.87%
Current Price $53.74
% of Intrinsic Value 122.29%

Davita Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2015 to an estimated $2.94 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Davita Inc revealed the company was trading above its Graham Number of $45.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.25, which was below the industry average of 53.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-40.73.

Davita Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$40.73
Graham Number $45.04
PEmg 18.25
Current Ratio 1.72
PB Ratio 2.29
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,424,159,000
Total Current Liabilities $4,891,161,000
Long-Term Debt $8,172,847,000
Total Assets $19,110,252,000
Intangible Assets $6,960,806,000
Total Liabilities $15,201,854,000
Shares Outstanding (Diluted Average) 166,413,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.05
Dec2018 $0.92
Dec2017 $3.47
Dec2016 $4.29
Dec2015 $1.25
Dec2014 $3.33
Dec2013 $2.95
Dec2012 $2.74
Dec2011 $2.48
Dec2010 $1.97
Dec2009 $2.03
Dec2008 $1.77
Dec2007 $1.78
Dec2006 $1.37
Dec2005 $1.10
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.61
Dec2001 $0.48
Dec2000 $0.05
Dec1999 -$0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.94
Dec2018 $2.48
Dec2017 $3.19
Dec2016 $3.01
Dec2015 $2.43
Dec2014 $2.91
Dec2013 $2.61
Dec2012 $2.36
Dec2011 $2.11
Dec2010 $1.88
Dec2009 $1.76
Dec2008 $1.55
Dec2007 $1.37
Dec2006 $1.11
Dec2005 $0.92
Dec2004 $0.76
Dec2003 $0.48

Recommended Reading:

Other ModernGraham posts about the company

DaVita Inc Valuation – June 2018 $DVA
Davita Inc Valuation – February 2017 $DVA
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
30 Companies in the Spotlight This Week – 11/15/14
DaVita Healthcare Partners Inc. Annual Valuation – 2014 $DVA

Other ModernGraham posts about related companies

Danaher Corp Valuation – March 2019 #DHR
Agilent Technologies Inc Valuation – March 2019 #A
ResMed Inc Valuation – March 2019 #RMD
Cooper Companies Inc Valuation – March 2019 #COO
Edwards Lifesciences Corp Valuation – March 2019 $EW
Boston Scientific Corporation Valuation – March 2019 $BSX
Baxter International Inc Valuation – March 2019 $BAX
Centene Corp Valuation – March 2019 $CNC
Abbott Laboratories Valuation – February 2019 $ABT
Becton Dickinson and Co Valuation – February 2019 $BDX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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