Intrinsic value of Boston Scientific - BSX

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$28.10

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BSX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 37.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.16
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
Revenue, $m
  8,386
  9,292
  10,241
  11,234
  12,271
  13,352
  14,477
  15,647
  16,863
  18,127
  19,441
  20,806
  22,225
  23,700
  25,235
  26,831
  28,493
  30,224
  32,028
  33,908
  35,869
  37,916
  40,052
  42,283
  44,615
  47,052
  49,601
  52,267
  55,056
  57,976
  61,033
Variable operating expenses, $m
 
  1,870
  1,993
  2,121
  2,255
  2,395
  2,541
  2,692
  2,849
  3,013
  3,183
  2,692
  2,875
  3,066
  3,265
  3,471
  3,686
  3,910
  4,143
  4,387
  4,640
  4,905
  5,181
  5,470
  5,772
  6,087
  6,417
  6,762
  7,122
  7,500
  7,896
Fixed operating expenses, $m
 
  6,559
  6,723
  6,891
  7,063
  7,240
  7,421
  7,606
  7,797
  7,991
  8,191
  8,396
  8,606
  8,821
  9,042
  9,268
  9,499
  9,737
  9,980
  10,230
  10,486
  10,748
  11,016
  11,292
  11,574
  11,863
  12,160
  12,464
  12,776
  13,095
  13,422
Total operating expenses, $m
  7,939
  8,429
  8,716
  9,012
  9,318
  9,635
  9,962
  10,298
  10,646
  11,004
  11,374
  11,088
  11,481
  11,887
  12,307
  12,739
  13,185
  13,647
  14,123
  14,617
  15,126
  15,653
  16,197
  16,762
  17,346
  17,950
  18,577
  19,226
  19,898
  20,595
  21,318
Operating income, $m
  447
  863
  1,526
  2,222
  2,953
  3,717
  4,515
  5,348
  6,217
  7,123
  8,067
  9,718
  10,744
  11,813
  12,929
  14,093
  15,308
  16,578
  17,904
  19,292
  20,743
  22,263
  23,854
  25,522
  27,269
  29,102
  31,024
  33,041
  35,158
  37,381
  39,715
EBITDA, $m
  1,262
  2,014
  2,727
  3,475
  4,259
  5,080
  5,937
  6,831
  7,763
  8,735
  9,747
  10,802
  11,901
  13,047
  14,243
  15,490
  16,792
  18,151
  19,572
  21,057
  22,611
  24,237
  25,940
  27,723
  29,592
  31,552
  33,607
  35,762
  38,025
  40,400
  42,893
Interest expense (income), $m
  233
  228
  279
  333
  389
  448
  509
  573
  639
  708
  780
  854
  931
  1,012
  1,095
  1,182
  1,273
  1,367
  1,465
  1,567
  1,673
  1,784
  1,900
  2,021
  2,148
  2,280
  2,418
  2,562
  2,713
  2,871
  3,036
Earnings before tax, $m
  177
  635
  1,246
  1,889
  2,563
  3,269
  4,006
  4,775
  5,578
  6,415
  7,287
  8,864
  9,813
  10,802
  11,834
  12,911
  14,036
  15,211
  16,440
  17,725
  19,070
  20,479
  21,954
  23,500
  25,122
  26,822
  28,606
  30,479
  32,445
  34,510
  36,679
Tax expense, $m
  -170
  172
  337
  510
  692
  883
  1,082
  1,289
  1,506
  1,732
  1,968
  2,393
  2,649
  2,916
  3,195
  3,486
  3,790
  4,107
  4,439
  4,786
  5,149
  5,529
  5,928
  6,345
  6,783
  7,242
  7,724
  8,229
  8,760
  9,318
  9,903
Net income, $m
  347
  464
  910
  1,379
  1,871
  2,386
  2,924
  3,486
  4,072
  4,683
  5,320
  6,471
  7,163
  7,885
  8,638
  9,425
  10,246
  11,104
  12,001
  12,939
  13,921
  14,949
  16,027
  17,155
  18,339
  19,580
  20,883
  22,250
  23,685
  25,192
  26,776

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  196
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  18,096
  19,854
  21,883
  24,005
  26,221
  28,529
  30,933
  33,433
  36,032
  38,733
  41,540
  44,458
  47,490
  50,642
  53,921
  57,332
  60,884
  64,582
  68,436
  72,453
  76,644
  81,016
  85,581
  90,349
  95,331
  100,539
  105,984
  111,681
  117,641
  123,881
  130,413
Adjusted assets (=assets-cash), $m
  17,900
  19,854
  21,883
  24,005
  26,221
  28,529
  30,933
  33,433
  36,032
  38,733
  41,540
  44,458
  47,490
  50,642
  53,921
  57,332
  60,884
  64,582
  68,436
  72,453
  76,644
  81,016
  85,581
  90,349
  95,331
  100,539
  105,984
  111,681
  117,641
  123,881
  130,413
Revenue / Adjusted assets
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
Average production assets, $m
  7,599
  8,418
  9,279
  10,178
  11,118
  12,097
  13,116
  14,176
  15,278
  16,423
  17,613
  18,850
  20,136
  21,473
  22,863
  24,309
  25,815
  27,383
  29,017
  30,721
  32,498
  34,352
  36,287
  38,309
  40,421
  42,629
  44,938
  47,353
  49,881
  52,526
  55,296
Working capital, $m
  -348
  -530
  -584
  -640
  -699
  -761
  -825
  -892
  -961
  -1,033
  -1,108
  -1,186
  -1,267
  -1,351
  -1,438
  -1,529
  -1,624
  -1,723
  -1,826
  -1,933
  -2,045
  -2,161
  -2,283
  -2,410
  -2,543
  -2,682
  -2,827
  -2,979
  -3,138
  -3,305
  -3,479
Total debt, $m
  5,484
  6,649
  7,929
  9,268
  10,666
  12,123
  13,640
  15,217
  16,857
  18,562
  20,333
  22,174
  24,087
  26,076
  28,145
  30,298
  32,538
  34,872
  37,304
  39,839
  42,483
  45,242
  48,123
  51,131
  54,275
  57,561
  60,997
  64,591
  68,353
  72,290
  76,412
Total liabilities, $m
  11,363
  12,528
  13,808
  15,147
  16,545
  18,002
  19,519
  21,096
  22,736
  24,441
  26,212
  28,053
  29,966
  31,955
  34,024
  36,177
  38,417
  40,751
  43,183
  45,718
  48,362
  51,121
  54,002
  57,010
  60,154
  63,440
  66,876
  70,470
  74,232
  78,169
  82,291
Total equity, $m
  6,733
  7,326
  8,075
  8,858
  9,675
  10,527
  11,414
  12,337
  13,296
  14,293
  15,328
  16,405
  17,524
  18,687
  19,897
  21,156
  22,466
  23,831
  25,253
  26,735
  28,282
  29,895
  31,580
  33,339
  35,177
  37,099
  39,108
  41,210
  43,410
  45,712
  48,122
Total liabilities and equity, $m
  18,096
  19,854
  21,883
  24,005
  26,220
  28,529
  30,933
  33,433
  36,032
  38,734
  41,540
  44,458
  47,490
  50,642
  53,921
  57,333
  60,883
  64,582
  68,436
  72,453
  76,644
  81,016
  85,582
  90,349
  95,331
  100,539
  105,984
  111,680
  117,642
  123,881
  130,413
Debt-to-equity ratio
  0.814
  0.910
  0.980
  1.050
  1.100
  1.150
  1.190
  1.230
  1.270
  1.300
  1.330
  1.350
  1.370
  1.400
  1.410
  1.430
  1.450
  1.460
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.570
  1.580
  1.590
Adjusted equity ratio
  0.365
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  347
  464
  910
  1,379
  1,871
  2,386
  2,924
  3,486
  4,072
  4,683
  5,320
  6,471
  7,163
  7,885
  8,638
  9,425
  10,246
  11,104
  12,001
  12,939
  13,921
  14,949
  16,027
  17,155
  18,339
  19,580
  20,883
  22,250
  23,685
  25,192
  26,776
Depreciation, amort., depletion, $m
  815
  1,152
  1,201
  1,253
  1,307
  1,363
  1,422
  1,483
  1,546
  1,612
  1,680
  1,083
  1,157
  1,234
  1,314
  1,397
  1,484
  1,574
  1,668
  1,766
  1,868
  1,974
  2,085
  2,202
  2,323
  2,450
  2,583
  2,721
  2,867
  3,019
  3,178
Funds from operations, $m
  968
  1,615
  2,111
  2,632
  3,178
  3,749
  4,346
  4,969
  5,618
  6,295
  7,000
  7,554
  8,321
  9,119
  9,952
  10,822
  11,730
  12,678
  13,669
  14,705
  15,789
  16,924
  18,112
  19,357
  20,662
  22,030
  23,465
  24,971
  26,552
  28,211
  29,954
Change in working capital, $m
  -4
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -166
  -174
Cash from operations, $m
  972
  1,581
  2,165
  2,689
  3,237
  3,811
  4,410
  5,035
  5,687
  6,367
  7,075
  7,632
  8,401
  9,203
  10,040
  10,913
  11,824
  12,776
  13,771
  14,812
  15,901
  17,040
  18,234
  19,484
  20,795
  22,169
  23,611
  25,123
  26,711
  28,378
  30,128
Maintenance CAPEX, $m
  0
  -437
  -484
  -533
  -585
  -639
  -695
  -754
  -815
  -878
  -944
  -1,012
  -1,083
  -1,157
  -1,234
  -1,314
  -1,397
  -1,484
  -1,574
  -1,668
  -1,766
  -1,868
  -1,974
  -2,085
  -2,202
  -2,323
  -2,450
  -2,583
  -2,721
  -2,867
  -3,019
New CAPEX, $m
  -508
  -820
  -860
  -900
  -939
  -979
  -1,019
  -1,060
  -1,102
  -1,145
  -1,190
  -1,237
  -1,286
  -1,337
  -1,390
  -1,446
  -1,506
  -1,568
  -1,634
  -1,703
  -1,777
  -1,854
  -1,936
  -2,022
  -2,112
  -2,208
  -2,309
  -2,415
  -2,527
  -2,645
  -2,770
Cash from investing activities, $m
  -887
  -1,257
  -1,344
  -1,433
  -1,524
  -1,618
  -1,714
  -1,814
  -1,917
  -2,023
  -2,134
  -2,249
  -2,369
  -2,494
  -2,624
  -2,760
  -2,903
  -3,052
  -3,208
  -3,371
  -3,543
  -3,722
  -3,910
  -4,107
  -4,314
  -4,531
  -4,759
  -4,998
  -5,248
  -5,512
  -5,789
Free cash flow, $m
  85
  325
  821
  1,255
  1,713
  2,193
  2,696
  3,221
  3,770
  4,343
  4,941
  5,383
  6,032
  6,709
  7,416
  8,152
  8,921
  9,725
  10,564
  11,441
  12,358
  13,319
  14,324
  15,377
  16,481
  17,638
  18,852
  20,125
  21,462
  22,865
  24,339
Issuance/(repayment) of debt, $m
  -190
  1,229
  1,280
  1,339
  1,398
  1,457
  1,517
  1,578
  1,640
  1,704
  1,771
  1,841
  1,913
  1,989
  2,069
  2,153
  2,241
  2,334
  2,432
  2,535
  2,644
  2,759
  2,880
  3,009
  3,144
  3,286
  3,436
  3,594
  3,761
  3,937
  4,122
Issuance/(repurchase) of shares, $m
  111
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -206
  1,229
  1,280
  1,339
  1,398
  1,457
  1,517
  1,578
  1,640
  1,704
  1,771
  1,841
  1,913
  1,989
  2,069
  2,153
  2,241
  2,334
  2,432
  2,535
  2,644
  2,759
  2,880
  3,009
  3,144
  3,286
  3,436
  3,594
  3,761
  3,937
  4,122
Total cash flow (excl. dividends), $m
  -123
  1,554
  2,101
  2,595
  3,111
  3,650
  4,212
  4,799
  5,410
  6,048
  6,712
  7,224
  7,946
  8,699
  9,485
  10,305
  11,162
  12,058
  12,995
  13,976
  15,003
  16,078
  17,204
  18,386
  19,624
  20,924
  22,288
  23,720
  25,223
  26,802
  28,461
Retained Cash Flow (-), $m
  -413
  -725
  -749
  -783
  -817
  -852
  -887
  -923
  -959
  -997
  -1,036
  -1,076
  -1,119
  -1,163
  -1,210
  -1,259
  -1,310
  -1,365
  -1,422
  -1,482
  -1,546
  -1,614
  -1,684
  -1,759
  -1,838
  -1,922
  -2,009
  -2,102
  -2,199
  -2,302
  -2,410
Prev. year cash balance distribution, $m
 
  132
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  961
  1,353
  1,811
  2,293
  2,798
  3,325
  3,876
  4,451
  5,051
  5,676
  6,147
  6,827
  7,535
  8,275
  9,046
  9,852
  10,694
  11,573
  12,493
  13,456
  14,464
  15,520
  16,626
  17,786
  19,002
  20,278
  21,618
  23,024
  24,500
  26,051
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  893
  1,160
  1,423
  1,637
  1,799
  1,908
  1,966
  1,975
  1,938
  1,862
  1,703
  1,575
  1,428
  1,269
  1,105
  942
  787
  643
  514
  401
  305
  227
  164
  116
  79
  53
  34
  21
  13
  7
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Boston Scientific Corporation develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. It operates through three segments: Cardiovascular, Rhythm Management, and MedSurg. The company offers interventional cardiology products, including drug-eluting coronary stent systems used in the treatment of coronary artery disease; other coronary therapy products to treat atherosclerosis; intravascular catheter-directed ultrasound imaging catheters, fractional flow reserve devices, and systems for use in coronary arteries and heart chambers, as well as certain peripheral vessels; and structural heart therapy systems. It also provides stents, balloon catheters, wires, peripheral embolization devices, and vena cava filters used to treat peripheral arterial disease; and biliary stents, drainage catheters, and micro-puncture sets to treat, diagnose, and ease benign and malignant tumors. In addition, the company offers cardiac rhythm management devices, such as implantable cardioverter defibrillator systems to detect and treat abnormally fast heart rhythms; implantable cardiac resynchronization therapy pacemaker systems used to treat heart failure; and medical technologies to diagnose and treat rate and rhythm disorders of the heart comprising steerable radio frequency ablation catheters, intracardiac ultrasound catheters, diagnostic catheters, delivery sheaths, and other accessories. Further, it provides products to diagnose and treat diseases of the pulmonary and gastrointestinal conditions; devices to diagnose, treat, and ease pulmonary disease systems within the airway and lungs; products to treat urinary stone disease and benign prostatic hyperplasia; mid-urethral sling products, sling and graft materials, pelvic floor reconstruction kits, and suturing devices; and spinal cord stimulator systems for the management of chronic pain. The company was founded in 1979 and is headquartered in Marlborough, Massachusetts.

FINANCIAL RATIOS  of  Boston Scientific (BSX)

Valuation Ratios
P/E Ratio 110.3
Price to Sales 4.6
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 39.4
Price to Free Cash Flow 82.5
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1%
Cap. Spend. - 3 Yr. Gr. Rate 11.9%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 80.5%
Total Debt to Equity 81.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -0.1%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. -0.1%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 71.5%
Gross Margin - 3 Yr. Avg. 71.1%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 5.3%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. -4.5%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. -0.2%
Effective Tax Rate -96%
Eff/ Tax Rate - 3 Yr. Avg. 14.6%
Payout Ratio 0%

BSX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BSX stock intrinsic value calculation we used $8386 million for the last fiscal year's total revenue generated by Boston Scientific. The default revenue input number comes from 2016 income statement of Boston Scientific. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BSX stock valuation model: a) initial revenue growth rate of 10.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.6%, whose default value for BSX is calculated based on our internal credit rating of Boston Scientific, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Boston Scientific.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BSX stock the variable cost ratio is equal to 20.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6399 million in the base year in the intrinsic value calculation for BSX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.2% for Boston Scientific.

Corporate tax rate of 27% is the nominal tax rate for Boston Scientific. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BSX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BSX are equal to 90.6%.

Life of production assets of 17.4 years is the average useful life of capital assets used in Boston Scientific operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BSX is equal to -5.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6733 million for Boston Scientific - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1349.36 million for Boston Scientific is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Boston Scientific at the current share price and the inputted number of shares is $37.9 billion.


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▶ What Dragged down BSXs 1Q17 Margins?   [09:07AM  Market Realist]
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▶ Boston Scientific Buys Symetis for $435 Million   [09:27AM  at Investopedia]
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Stock chart of BSX Financial statements of BSX Annual reports of BSX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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