Should You Buy Boston Scientific Stock?

Boston Scientific (BSX) recently reported its Q4 results, exceeding revenue and earnings expectations. With revenues of $3.7 billion and adjusted earnings of $0.55 per share, compared to consensus estimates of $3.6 billion and $0.51, respectively, BSX has seen a solid 13% rise in its stock price this year, partly fueled by its robust Q4 performance. Despite this, we believe that BSX stock is currently fully valued. In this analysis, we delve into Boston Scientific’s stock performance, key takeaways from its recent results, and its current valuation.

BSX stock has experienced significant gains, rising 85% from $35 in early January 2021 to around $65. However, over the same period, the S&P 500 increased by only about 30%. Despite being one of the few stocks to increase in value each year for the last three years, BSX has not consistently outperformed the market. Its returns were 18% in 2021, 9% in 2022, and 25% in 2023, compared to the S&P 500 returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating that BSX underperformed the S&P in 2021.

Beating the S&P 500 consistently has been challenging for individual stocks in recent years, including heavyweights in the Health Care sector and even megacap stars like Google, Tesla, and Microsoft. In contrast, the Trefis High-Quality Portfolio, comprising 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk.

Given the current macroeconomic environment characterized by high oil prices and elevated interest rates, there is uncertainty about whether BSX will underperform the S&P over the next 12 months or experience a strong jump. From a valuation standpoint, BSX stock appears to be appropriately priced, with an estimated valuation of $64 per share, slightly below its current levels of $66. This represents a 28x P/E multiple based on adjusted earnings expectations of $2.26 per share in 2024, aligning with the average P/E ratio over the last five years.

In Q4, Boston Scientific’s revenue of $3.7 billion was up 15% year-over-year, driven by 14% growth in the Cardiovascular segment and an 11% increase in MedSurg sales. The company’s acquisition of Apollo Endosurgery, Relievant Medsystems, and a majority stake in Acotec has contributed to its top-line growth, a trend expected to continue.

Boston Scientific’s operating margin expanded 90 basis points to 26.6% in Q4, leading to adjusted earnings of $0.55 per share, up 22% year-over-year. Looking ahead, the company anticipates sales to increase by 8.5% to 9.5% and earnings to range between $2.23 and $2.27 per share on a per-share and adjusted basis.

The company is expected to benefit from new product launches, including Agent, Rezum, POLARx FIT, Vercise, and XL valves, as well as its recent acquisitions. Its majority stake in Acotec is likely to boost its future sales growth in China. However, despite these positive developments, much of the upside potential for Boston Scientific appears to be already priced in, as it is currently trading at 29x forward earnings, compared to the five-year average of 28x.

While BSX stock seems to be appropriately priced, it is essential to consider how Boston Scientific’s peers are performing on relevant metrics. For more insights and comparisons across industries, explore Peer Comparisons.