What’s Boston Scientific’s Fair Stock Price Estimate Based On Expected 2020 Earnings?

by Trefis Team
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Boston Scientific
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Boston Scientific’s (NYSE:BSX) fair price estimate based on expected fiscal 2020 earnings is $44, according to Trefis estimates. This is slightly above the current market price of around $42. Boston Scientific is a healthcare company, which manufactures medical devices that are used primarily by various healthcare institutions in over 125 countries. Various hospitals, clinics, outpatient facilities, medical offices in around 100 countries in the U.S., Europe, Japan, and Asia Pacific use Boston Scientific’s devices. It competes with other medical devices companies, including Abbott Labs and Medtronic. In this note we discuss our stock price valuation for Boston Scientific. You can look at our interactive dashboard analysis ~ Boston Scientific Valuation: Expensive Or Cheap? ~ for more details.

We Can Break Down Boston Scientific’s Stock Price Estimate Into 4 Factors: 1. Total Revenue, 2. Net Income Margin, 3. No. of Shares, And 4. P/E Multiple

1. Boston Scientific’s Total Revenues Could Grow In Low Double-Digits To $11.9 Billion In 2020. Look At Our Interactive Dashboard Analysis ~ BSX Revenues: How Does Boston Scientific Make Money? ~ For A More In Depth View On The Company’s Revenues.

1.1. Comparing Boston Scientific’s Revenue Growth With That of Its Peers.

  • Boston Scientific’s revenues grew sharply in 2016, due to the AMS Portfolio and EndoChoice acquisition. Post 2016, the growth rate has been in high single-digits, trending upward.
  • Abbott’s revenue growth jumped from low single-digits in 2015 and 2016 to 31% in 2017, due to St. Jude’s acquisition. It grew in double-digits in 2018, due to the Alere acquisition, and it is now expected to be in mid-single-digits going forward. See more on Abbott’s revenues.
  • Medtronic’s revenue growth of 42% in fiscal 2016 reflects the impact of the Covidien acquisition. Post fiscal 2016, the growth rate has been expanding in low single-digits. See more on Medtronic’s revenues.

2. Boston Scientific’s Adjusted Net Income Has Seen Steady Growth Over The Past Few Years, And This Trend Could Continue In The Near Term.

3. Boston Scientific’s Adjusted EPS Grew 56% Between 2015 And 2018, And It Can Grow By 28% Between 2018-2020, According To Our Estimates.

  • Boston Scientific’s Adjusted EPS grew from $0.94 in 2015 to $1.47 in 2018.
  • We estimate it to be around $1.88 in 2020.
  • This growth can largely be attributed to higher adjusted net income, as discussed in the previous section.

4. Our Price Estimate of $44 For Boston Scientific’s Stock Based On Our Detailed Valuation Model Implies A 23x Earnings Multiple On Expected 2020 Adjusted Earnings of $1.88 Per Share.

4.1 Comparing Boston Scientific’s Historical P/E With That of Its Peers

  • P/E Multiples shown are based on the stock prices at the end of September of each year, and adjusted earnings for that full year (fiscal).
  • Boston Scientific’s P/E multiple has historically been slightly higher than that of its peers. All three healthcare companies have seen  multiple expansion in the recent years.
  • Boston Scientific’s P/E multiple expanded from 19.4x in 2015 to 26.6x in 2019.
  • This compares with Abbott, where the P/E expanded from 19.0x to 25.7x during the same period.
  • And Medtronic’s P/E multiple expanded from 15.9x to 20.9x during the same period.

 

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