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What Does Edwards Lifesciences Corporation's (NYSE:EW) Share Price Indicate?

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·4 min read
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Today we're going to take a look at the well-established Edwards Lifesciences Corporation (NYSE:EW). The company's stock saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Edwards Lifesciences’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Edwards Lifesciences

What's the opportunity in Edwards Lifesciences?

Edwards Lifesciences is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 65x is currently well-above the industry average of 49.08x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Edwards Lifesciences’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Edwards Lifesciences?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Edwards Lifesciences. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? EW’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe EW should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on EW for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for EW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Edwards Lifesciences, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Edwards Lifesciences and we think they deserve your attention.

If you are no longer interested in Edwards Lifesciences, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.