Although Boston Scientific (NYSE: BSX) has noted that its inventory is up more than 50% from the March 23 low, it is still down 13% since the beginning of the year. Inventory is now trading at more than 39 times projected 2020 earnings, despite the fact that the company is highly likely to see a decline in earnings of more than 35% this year. Does this make inventory more expensive? Probably not, given that revenue can grow more than 30% through 2023, while earnings expansion is expected to exceed 90% over the same period, generating strong returns for shareholders. This is how it is possible.
For more highlights on Boston Scientific’s long-standing performance, check out our interactive dashboard that has led Boston Scientific to grow up to 59% since the end of 2017.
Boston Scientific’s profits can grow up to 30%, from an estimated $ 10 billion in 2020 to around $ 13 billion through 2023, representing an expansion rate of about 9% consistent with the year (for the context, the annual expansion was around 9% between 2017 and 2019). Several trends help this continued expansion. First, we believe that elective surgeries postponed due to the Covid-19 pandemic in the first quarter and by the time they have an effect on Boston Scientific’s sales in 2020 will eventually be addressed. It is not that someone who is being asked to have surgery makes the decision not to have it. With the slow opening of economies, several fitness institutions have already started to practice elective surgeries. Boston Scientific manufactures various products, from coronary stents to endoscopic devices used in the medical field, and since elective surgeries are consistent with those formed, the company will see its sales increase. Additionally, the company is expected to launch several new products in the coming months, adding Watchman FLX, Acurate neo2, and Lotus Edge, which will drive earnings expansion in the coming years.
While Boston Scientific will post a drop in earnings this year, the company can simply delight in strong earnings expansion during 2021-2023, while the company is beyond investments in R
Now, if Boston Scientific’s profit accumulates by 90% between 2020 and 2023, the P / E will drop to 21 times from its current level, assuming the inventory value remains the same, right? no? But that’s what Boston Scientific investors are betting on! If profits accumulate by 90% over the next few years, instead of reducing P / E from around 39 times the current one to around 21 times, a situation where the P / E metric falls more modestly, maybe about 29 times, it turns out more likely. For context, Boston Scientific was trading at 29 times its 2019 annual profit toward the end of the year, while Abbott was trading at 26 times and Medtronic at 25 times. That would make Boston Scientific’s percentage value likely grow more than 40% over the next 3 years.
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