Boston Scientific (BSX) Provides Good Valuation, But Technically Shaky

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

The following post is provided exclusively to readers of SelfInvestors.com by the good folks at TheCorrectCall.com.  I agree that medical and drug stocks are showing some resiliency.. some even showing very bullish action, but being a technical trader myself I personally would hold off on Boston Scientific until it gets back above key resistance levels of the 50 and 200 day moving averages.  Perhaps its upcoming earnings report will be just the catalyst to do so. 

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Boston Scientific (BSX) makes a variety of medical devices that are used in several areas of interventional medicine across the globe. The company has three main focus areas: Cardiovascular, Endosurgery, and Neuromodulation.

BSX got some great news recently as its Xience V stent received FDA approval. It is partnering with Abbott Labs on the stent. This could give Boston Scientific a nice shot in the arm as sales of stents have declined lately due to safety concerns. In fact, Fitch raised BSX’s outlook to stable from negative due to its progress in the drug-coated stent market.

The company will report second-quarter earnings on July 22. Analysts are expecting 11 cents per share, which would represent 37% growth over last year’s results. BSX has dramatically exceeded expectations in each of the past three quarters, so it wouldn’t be unreasonable to expect it again. One analyst has raised his estimate just over the past week for this quarter.

We like the company’s valuations at these levels. It is only trading at 1.25x book value, which is a huge discount to several of its peers. Likewise, its price/sales ratio is low at 2.31. It is also changing hands at 18.7x next year’s earnings. This is below its expected growth of 22% for next year. With all of the positive developments, we see the stock at $15 in the next 3-to-6 months.

The timing could be right too. In our weekly review of industry performance and chart analysis, all things healthcare appear to be on the march forward. BSX’s chart reveals limited downside and a reliable buy signal.

Suggested Stop: $11.56

BSX

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