Have Investors Priced In Boston Scientific Corporation’s (NYSE:BSX) Growth?

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Boston Scientific Corporation (NYSE:BSX) is considered a high growth stock. However its last closing price of $41.72 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing BSX’s expected growth over the next few years.

Check out our latest analysis for Boston Scientific

What can we expect from Boston Scientific in the future?

According to the analysts covering the company, the following few years should bring about good growth prospects for Boston Scientific. Expectations from 23 analysts are bullish with earnings per share estimated to rise from today’s level of $1.299 to $1.685 over the next three years. This indicates an estimated earnings growth rate of 12% per year, on average, which illustrates an optimistic outlook in the near term.

Is BSX’s share price justifiable by its earnings growth?

Boston Scientific is looking rather expensive based on its price-to-earnings (PE) ratio of 32.13x. This illustrates that Boston Scientific is overvalued compared to the US market average ratio of 17.77x , and undervalued based on its latest annual earnings update compared to the Medical Equipment average of 41.45x .

NYSE:BSX Price Estimation Relative to Market, June 26th 2019
NYSE:BSX Price Estimation Relative to Market, June 26th 2019

Given that BSX’s price-to-earnings of 32.13x lies below the industry average, this already indicates that the company could be potentially undervalued. But, since Boston Scientific is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 32.13x and expected year-on-year earnings growth of 12% give Boston Scientific a quite high PEG ratio of 2.69x. This tells us that when we include its growth in our analysis Boston Scientific’s stock can be considered overvalued , based on the fundamentals.

What this means for you:

BSX’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are BSX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has BSX been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of BSX’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.