Should You Pick Boston Scientific Over Haemonetics?

by Trefis Team
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Boston Scientific
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Boston Scientific (NYSE:BSX), best known for its products in interventional medical specialties, has seen its stock price grow roughly 50% in the last few years. In comparison, Haemonetics (NYSE:HAE), one of the world’s largest blood management companies, has seen its stock grow by a stellar 90% during the same period. This comes despite the fact that Boston Scientific’s revenue growth was over 2x higher at 28%, compared to 12% for Haemonetics. Boston Scientific’s net margins are also higher at 21% vs 17% for Haemonetics. Does that make sense? We don’t think it does, and we believe Boston Scientific is a better investment opportunity at the moment compared to Haemonetics, as investors seek the stability of healthcare stocks during increasingly uncertain times. Our dashboard, ‘Boston Scientific vs. Haemonetics: Does The Stock Price Movement Make Sense?‘, has the underlying numbers.

Boston Scientific Has Strong Fundamentals And Its Valuation Is Attractive

Let’s look at the core business prospects of both companies a little more closely. Boston Scientific, with a market capitalization of $53 billion, is a large medical devices company, with multiple products to cater to interventional medical specialties. The company’s valuation has soared over the last few years, as investors sought the strong growth in its cadriovascular devices business, which includes intraluminal ultrasound imaging and structural heart therapy, coronary stent systems, and coronary revascularization products, accounting for 40% of the company’s total sales.

Haemonetics specializes in hematology products, including blood and plasma component collection, and hospital transfusion services. The company’s valuation also grew over the last few years, with its stock price doubling from $58 in the end of 2017 to $110 currently. There could be a couple of factors impacting Haemonetics valuation. Firstly, margin expansion of over 800 bps from 9.0% in fiscal 2017 to 17.3% in fiscal 2020 (Haemonetics fiscal ends in March), as compared to 250 bps margin expansion for Boston Scientific from 18.3% to 20.8% over the last three years. Secondly, margin expansion coupled with higher revenues led to a strong 116% growth in adjusted earnings per share for Haemonetics. This compares with 42% earnings growth for Boston Scientific over the last three years.

That said, we still believe Boston Scientific’s business looks quite attractive compared to Haemonetics, especially at current valuations. While both the companies have seen their P/E multiples expand 25% over the last three years, Boston Scientific trades at just 24.0x its 2019 EPS of $1.58, compared to Haemonetics’s stock trading at 33x its fiscal 2020 adjusted EPS of $3.31.

Looking for more insights on medical devices companies? See Best Coronavirus Testing Stocks: Abbott, Quest Or Chembio Diagnostics? and Is There More Upside For Intuitive Surgical’s Stock After A 50% Rebound?

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