Will Boston Scientific Stock See Higher Levels?

Boston Scientific stock (NYSE: BSX) has seen a fall of 3% in a month, compared with -5% returns for the broader S&P500 index. The company reported mixed Q4 results last month, with revenue falling in line but earnings missing the consensus estimate. Still, BSX stock trended higher due to better-than-expected guidance for 2023. However, we believe BSX stock is fully valued.

Boston Scientific’s revenue of $11.2 billion in Q4 2022 reflected a 3.7% y-o-y rise, driven by growth in both of its segments – Cardiovascular and MedSurg. The company continues to benefit from market share gains for its Left Atrial Appendage Closure device – Watchman – which saw its sales rise 22% y-o-y to $1.0 billion in 2022, compared to just $829 million in 2021 and $324 million in 2020. Boston Scientific also sees strong sales growth in Electrophysiology, up 18% y-o-y organically in 2022, and this trend is expected to continue in the near term.

The company has guided for its sales to rise between 5% and 7% and its adjusted EPS to be between $1.86 and $1.93 in 2023. It expects a 50 basis points improvement in operating margin in 2023. Our model considers the company’s guidance of mid-single-digit top-line growth and low double-digit bottom-line growth, partly driven by lower operating expenses.

But, looking at valuation, at its current level of $47, BSX stock is already trading at 24x its forward expected earnings of $1.92 (which is at the higher end of the guided range), aligning with its last three-year average, implying that BSX stock is fully valued. We estimate Boston Scientific’s Valuation to be around $49 per share, marginally above the current market price. This represents a 25x forward P/E multiple, slightly above its historical average mentioned above, owing to the expected rise in operating margin in the coming years.