24/7 Wall St. recently featured the waves of the most promising turnarounds for 2013. It was amazing to see some of the battered yet recovered stocks on that list. Some of the turnarounds we question, and we feel that some still have severe risks ahead. Boston Scientific Corp. (NYSE: BSX) was on this list due to a downgrade from Credit Suisse based on valuation rather than on business metrics. Now we have a research report that brings up more questions about the business metrics of this medical device company.

Argus is truly an independent research firm that does not have the traditional possible conflicts of interest as the sell-side research reports we usually see from Wall St. The firm reiterated its Hold rating and showed that Boston Scientific now trades at a lofty 16.5 times the Argus 2014 earnings per share estimate. There are issues beyond valuation here to consider.

Today’s research note indicates that Boston Scientific faces the twin headwinds of pricing pressure and declining sales in its two largest product segments. These are the Interventional Cardiology and Cardiac Rhythm Management units, which represent 56% of the company’s total revenue. The report is concerned that first-quarter results may not support the 36% share price appreciation so far in 2013.

David Toung of Argus said, “We are reducing our 2013 adjusted earnings per share estimate to $0.43 from $0.48 per share. For 2014, we are establishing an estimate of $0.47. Our estimates for both years include $0.24 per share in Guidant amortization expense.”

With medical device companies having new taxes and restrictions due to health care reform, a multiple of 16.5 times next year’s earnings seems rich when you consider a low-cash position and high-debt levels that generate negative net tangible assets of more than $5 billion. Boston Scientific shares are up 0.2% on the day, at $7.84 and the 52-week trading range is $4.79 to $7.95.

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