BSX is oversold/undervalued but lacks sufficient upside at current price due to execution risk; wait for a pullback for better margin of safety.

In this video, we take a look at Boston Scientific, whose stock market symbol is BSX. Boston Scientific is a medical device company that helps doctors, let's say, treat patients.

One of their major innovations is that they insert a small tube through a small incision, then pass instruments through it, in an attempt to improve recovery time and make surgery easier and more successful.

Currently, their focus is mostly on heart health, but they are expanding a little. I think one of the most interesting aspects of this company right now is, frankly, what's happening to its stock.

This is a graph of their stock's performance over the past year, and you can see that it has fallen by more than 50%.

So, the fundamental question is: Is this an investment opportunity right now? To better understand this company, I actually think that stock charts often give us interesting insights into what drives the company.

If we take a step back and look at this long-term stock chart, this is a five-year chart, you can see that the story gets interesting here. In 2014, Boston Scientific bought part of a company called Fairview.

They owned about 27 % at that time, and in 2021, they bought the rest of the company.

This is important because, going into 2025, they started to get different approvals in different markets.

But the biggest approval came in the American market, where they obtained a license for these surgical instruments for some patients , and the prospects were great. In fact, shortly after they received approval, and when they began introducing their products to the American market , and received further approval at the end of the year in Japan, management began raising their growth forecasts for these products.

They reached the billion-dollar mark very quickly . As we entered 2025, the products were experiencing increasing demand. Did you say it was approved in 2025? It was approved in 2024. My mistake. It was approved in 2024.

In 2025, the projections were fantastic. As you can see, the stock was rising higher and higher, and faster. But then things started to go off course. This rapid growth that analysts had predicted did not materialize as quickly as they had thought.

The stock began to receive punishment because of that. With the release of profits and the company going through bad quarters whose numbers did not meet expectations, the results worsened even more.

In fact, in early 2025, management was expecting double-digit growth for both Fairgrowth and Watchman products. These are their two largest and fastest-growing producers.

In the middle of the journey, as the decline began, things were not going as they had thought. Now, management is forecasting guidance of growth between 5 and 6%, about half of what they previously expected.

Interestingly, in August and even September, the company suffered a cyberattack that brought everything to a standstill . I mean, when I was reading about it, it was very bad for the company.

It brought the company to a complete standstill for two weeks.

Now, they have moved past that and overcome it . But as you can see, as far as the stock price is concerned, a lot of damage had already been done . I want to point out that when we look at this graph, the cyberattack was clearly a bad thing .

They had to get the systems working again online. They had to go back to shipping products and start reviving growth again . This is obviously bad.

But I would just like to point out that when I was reading the news, a lot of it focused a lot on this cyberattack, but look at the graph . The stock had already deteriorated before that happened.

Yes, that didn't help, and the stock definitely declined when that happened. But their stock hadn't exactly been a strong performer in the year prior. Now, I will also say that the growth was not bad in all respects.

In fact, when we look at US growth versus international growth, it is the US growth that has really suffered over the past twelve months . International growth has actually been very good.

The real downside to this is that their US market is much larger than their international market. In fact, when we turn to look at the pie chart of international versus American or non- American versus American growth, you can see that the United States accounts for about two-thirds of their total revenue.

Therefore, I would like to point out that it is good that this company is diverse. And of course, when we move on to start looking at some of the numbers, we find that the revenues performed very well.

I mean, it's impressive when you look at this graph .

I'm not sure what we would have thought when I first started analyzing the company. I flipped the numbers quickly, and when you see a revenue chart like this, you might not have anticipated the massive drop in the stock price.

But we need to know that this is largely related to future expectations . So, overall, revenue performance was fairly good. Then we move on to take a look at some operating margins.

Well, we can see that operating margins have increased ; they have risen gradually . Now, she's been a little unpredictable. It is not, as you know, completely stable. If anything, I'd say it's improved somewhat , but some of the fluctuations here have to do with, uh , them doing some acquisitions, and when you acquire a new company , you have to do a lot of work to get the necessary approvals and integrate it into the system.

This can add some expenses and increase the volatility of operating profit margins .

But in the end, those acquisitions did a pretty good job of pushing this company toward a more profitable position. This is free cash flow, and we can see that free cash flow has expanded well, especially in the last three years, and analysts expect free cash flow to continue to rise over the next five years.

So, although growth has been moderate, and incidentally, these analyst estimates take this moderate growth into account, although growth has slowed recently as some of their major products have encountered some obstacles, competition, etc., it is generally expected that they are still growing. So, overall, this is a good thing.

We will return to this shortly when we try to arrive at a fair and reasonable value for this company. But, with that said, let's move quickly to take a look at cash and debt. So, we can see that they have far more debt than cash and cash equivalents, but it is not by a huge margin.

But the reason this is important is that in January 2026, Boston Scientific announced that it was acquiring a company called Penumbra for about $14.5 billion. It's a cash and stock deal.

So , first they have to go out and raise that money, and it also gives us a reason to stop and look at Boston Scientific’s plan. You may notice that this is actually part of their strategy.

At the beginning of this video, I talked about how they acquired Faraplus, and they are growing by acquiring many different companies.

Benombra is not much different from that. It is a good supplement product, and a minimally invasive product that they can sell. This company achieved sales of approximately one and a half billion dollars last year, and the deal is expected to be completed by the end of this year.

There are many complementary products that you can cross-sell with other products you own when dealing with hospitals, doctors, surgeons, and the like. So, on a general level, this seems like a good step.

Interestingly, this deal does not look profitable from the outset, which simply means: will it add to earnings per share immediately, or will the cost of acquisition be more than the profits it will generate?

It appears that the initial cost will be slightly higher.

So I think that becomes the real question in general. Is this a good price they are paying for this growth, and can they execute correctly to achieve this growth?

I am not too surprised that they might pursue such an acquisition. This is one of their biggest acquisitions in recent years. And I expect them to do more in the future. This is a company that grows through acquisition, which is something many medical device companies do.

You find a small startup with a really good product , acquire it, pay a premium for it, and that's how you become in control of those patents, and you have the upper hand in that part of the business.

So this is not necessarily a bad move. The question is: Is this a good value at the moment, considering everything that is happening ? Well, at first glance, when we look at something like the forward price-to-earnings ratio, on the "Investors Grow" website, you can see here that we are simply analyzing different value points over the past few years.

This looks at a graph that goes back five years, and we can now see that if it is green, it appears to be undervalued . We can now see that it appears to be grossly undervalued .

I mean, it's valued far below its worth compared to its own history.

Now if you're wondering how to read this, you can see two different numbers at the top here . What happens if you buy it when it is undervalued and keep it for a year? This is the assumption we make.

If you buy it when it is undervalued, you will make a profit of 35%. If you buy it when it is overvalued , you will lose 22%, and this tells us that paying attention to the price-to- earnings ratio has historically proven correct.

This is a five-year chart showing the price-to- earnings ratio relative to its five- year moving average. This is what this diagram simply illustrates. It now appears to be undervalued, and historically, if you bought it as such, it would have performed fairly well .

Looking now at discounted cash flow, it is my preferred valuation method for most companies. Here we can see analysts' estimates for the next five years. If we take these figures and input them into a discounted cash flow calculator , we can see that at a required rate of return of 9%, the valuation is a bit low, and the stock is very close to its fair value at present.

At the time this image was taken from " Investor's Growth", the stock was trading at around $42 per share. The fair value is approximately $46 per share. So, it is valued at slightly less than its worth , but you get a required return, or expected return of about 9.5% per annum.

That's all well and good, but for me, the real question here is the risks of implementation for the company.

It is clear that the stock has declined significantly. In fact, as we saw in the price-to- earnings ratio chart, yes, it does appear to be undervalued relative to its earnings, because the numbers have not yet kept pace with the extent to which the stock has been subjected to heavy selling.

I truly believe the stock has been oversold, but I'm not sure the potential upside at the current price is enough to fully compensate for that . Now, if I owned this stock, I might be able to wait because the field is promising.

This area is likely to improve more quickly . Artificial intelligence, as I imagine, will propel this field forward at a faster pace.

Overall, this might be an interesting company to keep an eye on, but for me, it's one of those companies I like. It looks good. It's a fairly good buying option at the moment, but based on the discounted cash flow , I'd like to see it pull back a little.

I want a slightly larger margin of safety than we currently have . If it continues to decline, it might become more interesting. Otherwise, I will wait for the time being to see how things go.