Is Boston Scientific Stock A Buy?

Boston Scientific Corporation (NYSE:BSX) is a specialty medical device manufacturer and component of the S&P 500. Its main claim to fame is developing the Taxus Stent, used to unclog arteries by releasing medication. Over the years, it has acquired several other companies to give it a wide range of products.

The diversity means a broad revenue base, so is Boston Scientific stock a buy?

Medical devices are like pharmaceuticals – they require approval from the Food and Drug Administration (FDA) to be sold to the public. This makes it a very expensive industry where companies spend billions over a years-long clinical approval process.

Boston Scientific is an established company with a long track record of approvals. It even innovated on its own stent patent by gaining FDA approval in November 2020 for its Ranger drug-coated artery balloon. This helps remove plaque built up in the blood stream and preventing proper flow to limbs.

We check its vital signs to see if there’s life left in this stock for investors or whether its cash flow and growth are restricted.

Boston Scientific Is Globally Diversified

Boston Scientific was founded in 1979 and creates a range of interventional medical supplies.

Don’t let the name fool you – Boston Scientific has a global presence and markets/sells its products in the United States, EMEA (Europe, Middle East, Africa), and Asia-Pacific regions. It also has a presence in emerging markets.

The company has three business segments that all its products fall into:

• MedSurg,
• Rhythm and Neuro, &
• Cardiovascular

It went public in a 1992 IPO and spent the 2000s and 2010s on a mergers and acquisitions spree. Some of its buys include Precision Vascular Systems, TriVascular, Guidant, CryoCor, Labcoat Limited, nVision Medical Corporation, Securus Medical Group, and Vertiflex.

Each acquisition horizontally and vertically integrates the company to become the dominant player in its field. It offers about 13,000 products through its extensive portfolio and it’s known as one of the most inclusive companies to work for.

It also creates digital technology and received several FDA approvals in 2020, including a tablet platform to assist in percutaneous coronary procedures.

Is Boston Scientific Stock A Buy?

Boston Scientific Corporation is a massive company with a market capitalization in the tens of billions of dollars. The company reported $2.659 billion in revenue for the third quarter of 2020, a 5.7 percent decrease from the same quarter of the prior year.

That led to a net loss of $169 million, or -$0.12 earnings per share (EPS). It’s a far cry from the $126 million profit from the prior year.

Based on a discounted cash flow forecast analysis, it has an upside fair market value share price potential of $43 per share. Price levels below this suggest the company is undervalued and has room to grow.

 

It launched a multitude of products in the third quarter too, including a digital catheter, hydrogel spacer, aortic valve system, and another drug-eluting vascular stent system. Although revenues and profits were down, the company continued its mergers and acquisitions roadmap and forged new partnerships.

While everything sounds great, the stock deflated by the end of the year, leaving bearish investors to remind of the risks.

Even Boston Scientific Not Immune From Pandemic

One of the biggest problems during the pandemic is its cost on the healthcare infrastructure. You might think that all these reports of hospitals overflowing with patients would lead to record-setting revenues, but that’s not what happened.

In fact, the American Hospital Association estimates health systems and hospitals lost $202.6 billion from March through June 2020 alone.

There is a dual-pronged problem where people are avoiding hospitals because of COVID-19. On top of that, record-high unemployment means fewer people have health insurance. This creates major problems that bottleneck the possible revenue these companies can bring in. Even operating at the backend of the industry in the spotlight doesn’t guarantee profitability.

It also had previous legal complications over its vaginal mesh device and legal battles with a big competitor.

Who Competes With Boston Scientific?

Boston Scientific isn’t alone in its market – Johnson & Johnson (JNJ) has a similar artery device. They sued each other in the 2010s over their similar patents. And that giant company isn’t going to let the battle go easily.

That’s just one competitor.

Medtronic (MDT), Abbott Labs (ABT), Olympus, and more all have products in their pipeline to compete with Boston Scientific. Receiving FDA approval only gives temporary protections, and medical technology is constantly evolving.

There’s a lot of change coming to healthcare, including telehealth/telemedicine, new approaches to health insurance, and wearable fitness trackers being more prolific. This will likely draw a lot of big tech companies into the market and trigger even more competition.

Whether the company is disrupted or bought out could depend on its ability to adapt over the next decade.

Is Boston Scientific Stock A Buy? The Bottom Line

Boston Scientific is an established medical device company with a long history of FDA approvals. It continued releasing products to help with a wide range of issues like cardiovascular plaque and urinary tract issues. It’s also known for going on buying sprees to vertically and horizontally integrate.

The pandemic changed the paradigm though. Even many healthcare companies are struggling, and patients are avoiding going into the hospital to have procedures. Worse still, it’s dragging into another year. This could strangle the company’s profits and leave room for disruption.

If it can’t turn things back around, Boston Scientific may end up being acquired itself.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.