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.


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.


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
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



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


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.


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.