Boston Scientific Downgrade -- Valuation or Turnaround Risk?

Health and Healthcare

Published: April 3, 2013 9:20 am

Boston Scientific Corp. (NYSE: BSX) is in a long-term turnaround that frankly just feels like it never really has turned around. Or has it?

We can criticize the mistakes of management from before the recession that wrecked the company with a massively leveraged acquisition, but the reality is that shares are up 65% from the lows of 2012. We assumed that an analyst downgrade today would have been over a lack of ability to turn this ship around, but that downgrade was based on valuation.

The medical device maker’s shares were downgraded to Neutral from Outperform at Credit Suisse. Again, we were surprised to see that the downgrade was based on valuation when you consider that this stock used to trade north of $40 and higher, versus $7.89 as of Tuesday’s closing bell.

Credit Suisse said that the stock was simply now within 8% of its $8.50 price target and that the stock merely just did not have enough implied upside to continue with an Outperform rating. The firm said:

While we don’t see Boston Scientifics’s current valuation of 10-times 2014 P/E (ex-amortization) as stretched, we believe further upside likely requires outperformance relative to expectations which have been elevated following the company’s sequential top-line improvement in the fourth quarter of 2012 and its investor day.

We figured that this was a lack of catalysts or an inability to turn around a stuck ship. It was just a valuation downgrade. Shares of Boston Scientific are down close to 2% on Wednesday around $7.75, against a 52-week trading range of $4.79 to $7.95.

Imagine what sort of valuation concerns would be present if this stock rose the 500% or so required to back to its old highs from before the recession. The market value today is $10.7 billion. A gain of 65% from the low sure sounds like a good turnaround. The problem is that it barely scratches the surface in getting the shares back anywhere close to where they were before.

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.