DCF Studio

    BSX · NYQ · Healthcare

    Boston Scientific Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 53.41

    Market price

    USD 43.34

    Implied upside

    +23.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 53.41+23.2%
    Exit multiple
    USD 76.30+76.0%
    Market price
    USD 43.34

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn6bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 23.4bnUSD 27.3bnUSD 31.8bnUSD 37.0bnUSD 43.2bn+16.5%
    EBITUSD 4.1bnUSD 4.8bnUSD 5.6bnUSD 6.5bnUSD 7.6bn+16.5%
    NOPATUSD 3.3bnUSD 3.9bnUSD 4.5bnUSD 5.3bnUSD 6.1bn+16.5%
    Add depreciation & amortisationUSD 1.9bnUSD 2.2bnUSD 2.5bnUSD 2.9bnUSD 3.4bn+16.5%
    Less capital expenditureUSD -1.3bnUSD -1.5bnUSD -1.8bnUSD -2.1bnUSD -2.4bn+16.5%
    Less increase in working capitalUSD -611.9mUSD -713.2mUSD -831.1mUSD -968.6mUSD -1.1bn+16.5%
    Free cashflow to firmUSD 3.3bnUSD 3.8bnUSD 4.4bnUSD 5.2bnUSD 6.0bn+16.5%
    Discount factor0.96160.88910.82200.76010.7028-
    Present valueUSD 3.1bnUSD 3.4bnUSD 3.6bnUSD 3.9bnUSD 4.2bn+7.8%
    Present Value Of The ForecastUSD 18.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.711Reported 0.568, pulled toward 1.0 (Blume)
    Cost of equity8.91%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 62.8bn84.6% of capital
    Total debtUSD 11.4bn15.4% of capital, book value as a proxy
    Tax rate19.5%Effective, capped at statutory
    WACC8.15%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 53.41

    79% of EV

    Forecast FCFF, final year
    USD 6.0bn
    Capex at depreciation, working capital in reinvestment
    USD 8.0bn
    Less reinvestment at g/ROIC (30.7% of NOPAT)
    USD -2.5bn
    Capitalised
    USD 5.6bn
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    USD 101.0bn
    Terminal value, discounted
    USD 71.0bn
    Enterprise value
    USD 89.3bn
    Less net debt
    USD 9.5bn
    Equity value
    USD 79.8bn

    Exit at 13.5x EBITDA

    Value per shareUSD 76.30

    85% of EV

    Terminal value, undiscounted
    USD 149.7bn
    Terminal value, discounted
    USD 105.2bn
    Enterprise value
    USD 123.5bn
    Less net debt
    USD 9.5bn
    Equity value
    USD 114.0bn

    Spread between methods: 35%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.15%77.3979.2781.5884.5388.48
    7.15%62.1362.4262.7062.9963.28
    8.15%52.9553.1853.4153.6453.87
    9.15%45.8246.0146.2146.4146.61
    10.15%40.1240.2940.4640.6340.80

    Outlined: this model. Green text: above today's price of 43.34. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year16.5%11.7%-4.8pp
    EBIT margin17.7%14.0%-3.6pp
    Discount rate8.2%9.6%+1.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.