Boston Scientific has been treading water for the past six months, recording a small loss of 3.5% while holding steady at $102.88. The stock also fell short of the S&P 500’s 13% gain during that period.
Is now the time to buy BSX? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free for active Edge members.
Why Does Boston Scientific Spark Debate?
Founded in 1979 with a mission to advance less-invasive medicine, Boston Scientific (NYSE: BSX) develops and manufactures medical devices used in minimally invasive procedures across cardiovascular, urological, neurological, and gastrointestinal specialties.
Two Things to Like:
1. Core Business Firing on All Cylinders
In addition to reported revenue, organic revenue is a useful data point for analyzing Medical Devices & Supplies - Diversified companies. This metric gives visibility into Boston Scientific’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Boston Scientific’s organic revenue averaged 16.2% year-on-year growth. This performance was impressive and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Boston Scientific’s margin expanded by 5.5 percentage points over the last five years. This is encouraging because it gives the company more optionality. Boston Scientific’s free cash flow margin for the trailing 12 months was 19.8%.
One Reason to be Careful:
Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Although Boston Scientific has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.3%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.
Final Judgment
Boston Scientific’s positive characteristics outweigh the negatives. With its shares underperforming the market lately, the stock trades at 31.7× forward P/E (or $102.88 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More Than Boston Scientific
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