Edwards Lifesciences Corp Valuation – February 2016 $EW

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 Companies Benjamin Graham Would Invest In Today – February 2016.  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 Edwards Lifesciences Corp (EW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Edwards Lifesciences Corporation is focused on technologies that treat structural heart disease and critically ill patients. The Company is engaged in the development and commercialization of heart valve therapies. It is a manufacturer of heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Company develops hemodynamic monitoring systems used to measure a patient’s cardiovascular function in the hospital setting. Patients in the hospital setting, including high-risk patients in the operating room or intensive care unit, are candidates for having their cardiac function or fluid levels monitored by the its Critical Care products. The Company’s products and technologies it offers to treat advanced cardiovascular disease are categorized into three main areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care.


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 EW

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 $16,291,500,968 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.03 Pass
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 392.86% Pass
6. Moderate PEmg Ratio PEmg < 20 33.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.99 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 4.03 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.38 Pass
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

EW value chart February 2016

EPSmg $2.28
MG Growth Estimate 15.00%
MG Value $87.95
Opinion Fairly Valued
MG Value based on 3% Growth $33.12
MG Value based on 0% Growth $19.42
Market Implied Growth Rate 12.60%
Current Price $76.98
% of Intrinsic Value 87.53%

Edwards Lifesciences Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.87 in 2011 to an estimated $2.28 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 12.6% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Stage 3: Information for Further Research

EW charts February 2016

Net Current Asset Value (NCAV) $3.14
Graham Number $23.29
PEmg 33.70
Current Ratio 4.03
PB Ratio 6.99
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 Sep2015
Total Current Assets $2,145,500,000
Total Current Liabilities $532,500,000
Long-Term Debt $604,900,000
Total Assets $3,876,600,000
Intangible Assets $828,500,000
Total Liabilities $1,455,200,000
Shares Outstanding (Diluted Average) 220,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.15
Dec2014 $3.74
Dec2013 $1.71
Dec2012 $1.23
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.98
Dec2008 $0.55
Dec2007 $0.47
Dec2006 $0.53
Dec2005 $0.32
Dec2004 $0.01
Dec2003 $0.32
Dec2002 $0.23
Dec2001 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.28
Dec2014 $2.14
Dec2013 $1.28
Dec2012 $1.02
Dec2011 $0.87
Dec2010 $0.77
Dec2009 $0.66
Dec2008 $0.46
Dec2007 $0.38
Dec2006 $0.32
Dec2005 $0.20
Dec2004 $0.13
Dec2003 $0.16
Dec2002 $0.06
Dec2001 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Medical Industry – September 2015
The Best Companies of the Medical Industry – June 2015
The 6 Best Stocks For Value Investors This Week – 6/13/15
Edwards Lifesciences Corporation Analysis – June 2015 Update $EW
18 Companies in the Spotlight This Week – 3/15/15

Other ModernGraham posts about related companies

Cerner Corporation Valuation – February 2016 Update $CERN
Henry Schein Inc Valuation – February 2016 Update $HSIC
Medtronic PLC Valuation – January 2016 Update $MDT
PerkinElmer Inc Valuation – January 2016 Update $PKI
Quest Diagnostics Inc Valuation – January 2016 Update $DGX
Dentsply International Inc Valuation – November 2015 Update $XRAY
UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
DaVita HealthCare Partners Inc Valuation – November 2015 Update $DVA
Align Technology Inc. Valuation – November 2015 Update $ALGN
Varian Medical Systems Inc. Valuation – November 2015 Update $VAR


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.

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.