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Monday, September 25, 2006

Has Boston Scientific Finally Found Bottom? (BSX)

Boston Scientific continues to be haunted by its drug-coated stents. The company has also had to recall defibrillators. The devices have caused health problems in a number of patients. Recently, the company guided down its sales target to as little as $1.97 billion for the third quarter. EPS will be $.15 to $.19, not far off the price target Wall St. already has, according to Forbes.

But, the stock may have reached bottom. It now trades at about $14.50, its 52-week low. The stock is down by half over the period. Two years ago it was at $40.

Even at a revenue run-rate of $8 billion, the company would be well ahead of the $6.3 billion it did last year. The company certainly has a number of product issues to solve and the litigation Boston Scientific is facing litigation over clots that may have developed from its stents. A new generation of the product is in development. The Guidant acquisition was probably not in the best interest of shareholders, but the work to integrate the company is now largely in the past.

Boston Scientifics multiple of revenue to market cap has fallen to 3.5, below Johnson & Johnson at 3.7. The company’s forward PE is about 15, below the figure for the S&P 500.
If the company solves the lion’s share of its problems over the next year, the stock may have found a bottom.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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