Unveiling Edwards Lifesciences (EW)'s Value: Is It Really Priced Right? A Comprehensive Guide
Edwards Lifesciences (NYSE:EW) experienced a daily loss of 2% and a 3-month loss of 22.12%, with an Earnings Per Share (EPS) (EPS) of 2.26. This article seeks to answer the question: Is the stock significantly undervalued? We will explore the company's valuation, financial strength, profitability, and growth to provide a comprehensive analysis. Let's delve into the details.
Company Introduction
Edwards Lifesciences Corp (NYSE:EW), spun off from Baxter International in 2000, designs, manufactures, and markets a range of medical devices and equipment for advanced stages of structural heart disease. The company's key products include surgical tissue heart valves, transcatheter valve technologies, surgical clips, catheters, and monitoring systems used to measure a patient's heart function during surgery. Edwards Lifesciences derives about 55% of its total sales from outside the U.S.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
Edwards Lifesciences (NYSE:EW) appears to be significantly undervalued based on GuruFocus' valuation method. The stock's fair value is estimated based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $ 71.44 per share, Edwards Lifesciences stock appears to be significantly undervalued. Because Edwards Lifesciences is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Edwards Lifesciences has a cash-to-debt ratio of 2.21, which is worse than 51.02% of 833 companies in the Medical Devices & Instruments industry. GuruFocus ranks the overall financial strength of Edwards Lifesciences at 8 out of 10, which indicates that the financial strength of Edwards Lifesciences is strong.
Profitability and Growth
It is less risky to invest in profitable companies, especially those with consistent profitability over the long term. A company with high profit margins is usually a safer investment than those with low profit margins. Edwards Lifesciences has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $5.70 Billion and an Earnings Per Share (EPS) of $2.26. Its operating margin is 31.51%, which ranks better than 95.05% of 829 companies in the Medical Devices & Instruments industry. Overall, the profitability of Edwards Lifesciences is ranked 10 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Edwards Lifesciences is 8.1%, which ranks better than 52.06% of 728 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth is 15.5%, which ranks better than 59.86% of 730 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Edwards Lifesciences's return on invested capital is 23.95, and its cost of capital is 10.99.
Conclusion
In conclusion, the stock of Edwards Lifesciences (NYSE:EW) appears to be significantly undervalued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 59.86% of 730 companies in the Medical Devices & Instruments industry. To learn more about Edwards Lifesciences stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
