Is Boston Scientific’s Valuation Still Justified After Recent Acquisition Driven Growth?
- If you are wondering whether Boston Scientific at around $92 a share is still a smart buy or if the big gains are already behind it, this breakdown is for you.
- The stock has slipped about 5.1% over the last week and 11.1% over the past month, but it is still up 3.6% year to date and 102.1% over three years and 161.2% over five years, which highlights its longer term momentum.
- Recent headlines have focused on Boston Scientific's continued expansion in minimally invasive cardiovascular and neuromodulation technologies, along with strategic acquisitions that aim to deepen its footprint in fast growing treatment areas. At the same time, analysts have been revisiting their price targets as the market weighs those growth initiatives against a richer starting valuation.
- Despite that backdrop, Boston Scientific only scores 1 out of 6 on our valuation checks. This suggests the market may already be pricing in a lot of optimism. Next we will unpack the key valuation approaches investors typically use, before finishing with a more holistic way to think about what this stock might be worth.
Boston Scientific scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Boston Scientific Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today to account for risk and the time value of money.
Boston Scientific currently generates about $3.8 billion in free cash flow, and analyst forecasts plus Simply Wall St extrapolations suggest this could rise to around $6.4 billion by 2035. The 2 Stage Free Cash Flow to Equity model factors in higher growth in the near term, then tapers it off over time, with each year’s projected cash flow discounted back to a present value in dollars.
Adding these discounted cash flows together gives an estimated intrinsic value of about $68.49 per share. With the stock trading around $92, the DCF implies it is roughly 35.2% above this fair value estimate, pointing to a meaningful premium rather than a bargain.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Boston Scientific may be overvalued by 35.2%. Discover 907 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Boston Scientific Price vs Earnings
For profitable companies like Boston Scientific, the price to earnings, or PE, ratio is a practical way to gauge how much investors are paying for each dollar of current profit. A higher PE can be justified when a business has strong, durable growth prospects and relatively low risk, while slower growing or riskier companies typically deserve a lower, more conservative PE.
Boston Scientific currently trades on a PE of about 49.2x. That stands well above the broader Medical Equipment industry average of roughly 30.4x and also higher than the peer group average of around 39.6x, suggesting investors are already paying a premium for its growth story. To refine this view, Simply Wall St calculates a proprietary Fair Ratio of 38.0x for Boston Scientific, which is the PE we would expect given its earnings growth outlook, profitability, size, industry and risk profile.
This Fair Ratio is more informative than a simple comparison with peers or the sector, because it explicitly adjusts for company specific factors such as growth, margins and risk. When we compare the Fair Ratio of 38.0x to the actual PE of 49.2x, Boston Scientific screens as trading noticeably above where it probably should be based on its fundamentals.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Boston Scientific Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple way to attach your story about Boston Scientific to the numbers by linking your assumptions for future revenue, earnings and margins to a financial forecast and then to a fair value estimate. All of this happens within the Narratives tool on Simply Wall St’s Community page that millions of investors use to decide whether to buy or sell by comparing their Fair Value to today’s Price. Each Narrative updates dynamically as new news or earnings arrive. For example, one Boston Scientific Narrative might lean bullish, assuming strong multi year execution momentum and assigning a fair value closer to the high analyst target of about $140. Another more cautious Narrative could focus on cost pressures, competition and regulatory risk and land nearer the low end around $99. This gives you a clear, side by side view of how different perspectives on the same company can lead to very different but fully quantified investment decisions.
Do you think there's more to the story for Boston Scientific? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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