Intrinsic value of Boston Scientific - BSX

Previous Close

$26.68

  Intrinsic Value

$19.06

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

+790%

Previous close

$26.68

 
Intrinsic value

$19.06

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

+790%

*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 36.0

 

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
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  8,386
  9,225
  10,101
  11,015
  11,967
  12,958
  13,989
  15,060
  16,173
  17,330
  18,532
  19,782
  21,081
  22,433
  23,840
  25,304
  26,830
  28,420
  30,078
  31,808
  33,613
  35,498
  37,467
  39,525
  41,676
  43,926
  46,280
  48,744
  51,323
  54,023
  56,852
Variable operating expenses, $m
 
  1,861
  1,975
  2,093
  2,216
  2,344
  2,477
  2,616
  2,760
  2,910
  3,065
  2,559
  2,727
  2,902
  3,084
  3,274
  3,471
  3,677
  3,891
  4,115
  4,348
  4,592
  4,847
  5,113
  5,392
  5,683
  5,987
  6,306
  6,639
  6,989
  7,355
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
  8,420
  8,698
  8,984
  9,279
  9,584
  9,898
  10,222
  10,557
  10,901
  11,256
  10,955
  11,333
  11,723
  12,126
  12,542
  12,970
  13,414
  13,871
  14,345
  14,834
  15,340
  15,863
  16,405
  16,966
  17,546
  18,147
  18,770
  19,415
  20,084
  20,777
Operating income, $m
  447
  804
  1,403
  2,031
  2,688
  3,374
  4,090
  4,837
  5,616
  6,429
  7,276
  8,827
  9,748
  10,710
  11,714
  12,763
  13,860
  15,007
  16,207
  17,463
  18,779
  20,158
  21,604
  23,120
  24,711
  26,380
  28,133
  29,974
  31,908
  33,939
  36,075
EBITDA, $m
  1,262
  1,953
  2,597
  3,273
  3,979
  4,717
  5,487
  6,289
  7,126
  7,999
  8,908
  9,857
  10,846
  11,878
  12,955
  14,081
  15,257
  16,487
  17,773
  19,119
  20,529
  22,006
  23,555
  25,178
  26,881
  28,668
  30,543
  32,512
  34,580
  36,752
  39,035
Interest expense (income), $m
  233
  228
  275
  325
  377
  431
  487
  545
  606
  669
  734
  803
  873
  947
  1,023
  1,103
  1,186
  1,272
  1,362
  1,456
  1,554
  1,657
  1,763
  1,875
  1,991
  2,113
  2,241
  2,374
  2,513
  2,659
  2,812
Earnings before tax, $m
  177
  577
  1,128
  1,706
  2,311
  2,943
  3,604
  4,292
  5,011
  5,760
  6,541
  8,024
  8,875
  9,763
  10,691
  11,660
  12,674
  13,734
  14,844
  16,007
  17,225
  18,502
  19,840
  21,245
  22,719
  24,267
  25,893
  27,600
  29,394
  31,280
  33,262
Tax expense, $m
  -170
  156
  305
  461
  624
  795
  973
  1,159
  1,353
  1,555
  1,766
  2,166
  2,396
  2,636
  2,886
  3,148
  3,422
  3,708
  4,008
  4,322
  4,651
  4,995
  5,357
  5,736
  6,134
  6,552
  6,991
  7,452
  7,936
  8,446
  8,981
Net income, $m
  347
  421
  823
  1,246
  1,687
  2,149
  2,631
  3,133
  3,658
  4,205
  4,775
  5,858
  6,479
  7,127
  7,804
  8,512
  9,252
  10,026
  10,836
  11,685
  12,574
  13,506
  14,484
  15,509
  16,585
  17,715
  18,902
  20,148
  21,458
  22,834
  24,281

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
  19,711
  21,583
  23,536
  25,571
  27,689
  29,891
  32,179
  34,558
  37,030
  39,598
  42,269
  45,045
  47,934
  50,940
  54,069
  57,329
  60,727
  64,270
  67,965
  71,823
  75,850
  80,058
  84,455
  89,052
  93,860
  98,890
  104,154
  109,664
  115,434
  121,478
Adjusted assets (=assets-cash), $m
  17,900
  19,711
  21,583
  23,536
  25,571
  27,689
  29,891
  32,179
  34,558
  37,030
  39,598
  42,269
  45,045
  47,934
  50,940
  54,069
  57,329
  60,727
  64,270
  67,965
  71,823
  75,850
  80,058
  84,455
  89,052
  93,860
  98,890
  104,154
  109,664
  115,434
  121,478
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
  8,357
  9,151
  9,980
  10,842
  11,740
  12,674
  13,644
  14,653
  15,701
  16,790
  17,922
  19,100
  20,324
  21,599
  22,926
  24,308
  25,749
  27,251
  28,818
  30,453
  32,161
  33,945
  35,810
  37,759
  39,797
  41,930
  44,162
  46,498
  48,945
  51,508
Working capital, $m
  -348
  -526
  -576
  -628
  -682
  -739
  -797
  -858
  -922
  -988
  -1,056
  -1,128
  -1,202
  -1,279
  -1,359
  -1,442
  -1,529
  -1,620
  -1,714
  -1,813
  -1,916
  -2,023
  -2,136
  -2,253
  -2,376
  -2,504
  -2,638
  -2,778
  -2,925
  -3,079
  -3,241
Total debt, $m
  5,484
  6,558
  7,740
  8,973
  10,256
  11,593
  12,982
  14,426
  15,927
  17,487
  19,108
  20,792
  22,545
  24,367
  26,264
  28,239
  30,296
  32,440
  34,675
  37,007
  39,441
  41,983
  44,638
  47,412
  50,313
  53,347
  56,520
  59,842
  63,319
  66,960
  70,774
Total liabilities, $m
  11,363
  12,437
  13,619
  14,852
  16,135
  17,472
  18,861
  20,305
  21,806
  23,366
  24,987
  26,671
  28,424
  30,246
  32,143
  34,118
  36,175
  38,319
  40,554
  42,886
  45,320
  47,862
  50,517
  53,291
  56,192
  59,226
  62,399
  65,721
  69,198
  72,839
  76,653
Total equity, $m
  6,733
  7,273
  7,964
  8,685
  9,436
  10,217
  11,030
  11,874
  12,752
  13,664
  14,612
  15,597
  16,622
  17,688
  18,797
  19,952
  21,154
  22,408
  23,715
  25,079
  26,503
  27,989
  29,541
  31,164
  32,860
  34,634
  36,490
  38,433
  40,466
  42,595
  44,825
Total liabilities and equity, $m
  18,096
  19,710
  21,583
  23,537
  25,571
  27,689
  29,891
  32,179
  34,558
  37,030
  39,599
  42,268
  45,046
  47,934
  50,940
  54,070
  57,329
  60,727
  64,269
  67,965
  71,823
  75,851
  80,058
  84,455
  89,052
  93,860
  98,889
  104,154
  109,664
  115,434
  121,478
Debt-to-equity ratio
  0.814
  0.900
  0.970
  1.030
  1.090
  1.130
  1.180
  1.210
  1.250
  1.280
  1.310
  1.330
  1.360
  1.380
  1.400
  1.420
  1.430
  1.450
  1.460
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.560
  1.570
  1.580
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
  421
  823
  1,246
  1,687
  2,149
  2,631
  3,133
  3,658
  4,205
  4,775
  5,858
  6,479
  7,127
  7,804
  8,512
  9,252
  10,026
  10,836
  11,685
  12,574
  13,506
  14,484
  15,509
  16,585
  17,715
  18,902
  20,148
  21,458
  22,834
  24,281
Depreciation, amort., depletion, $m
  815
  1,148
  1,194
  1,241
  1,291
  1,343
  1,396
  1,452
  1,510
  1,570
  1,633
  1,030
  1,098
  1,168
  1,241
  1,318
  1,397
  1,480
  1,566
  1,656
  1,750
  1,848
  1,951
  2,058
  2,170
  2,287
  2,410
  2,538
  2,672
  2,813
  2,960
Funds from operations, $m
  968
  1,569
  2,017
  2,487
  2,978
  3,491
  4,027
  4,585
  5,168
  5,775
  6,408
  6,888
  7,576
  8,295
  9,045
  9,829
  10,649
  11,506
  12,402
  13,341
  14,324
  15,354
  16,434
  17,567
  18,755
  20,002
  21,311
  22,686
  24,130
  25,647
  27,242
Change in working capital, $m
  -4
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -123
  -128
  -134
  -140
  -147
  -154
  -161
Cash from operations, $m
  972
  1,617
  2,067
  2,539
  3,032
  3,548
  4,085
  4,646
  5,231
  5,841
  6,476
  6,959
  7,650
  8,372
  9,126
  9,913
  10,736
  11,596
  12,497
  13,440
  14,427
  15,462
  16,547
  17,684
  18,878
  20,131
  21,446
  22,827
  24,277
  25,801
  27,403
Maintenance CAPEX, $m
  0
  -437
  -480
  -526
  -574
  -623
  -675
  -728
  -784
  -842
  -902
  -965
  -1,030
  -1,098
  -1,168
  -1,241
  -1,318
  -1,397
  -1,480
  -1,566
  -1,656
  -1,750
  -1,848
  -1,951
  -2,058
  -2,170
  -2,287
  -2,410
  -2,538
  -2,672
  -2,813
New CAPEX, $m
  -508
  -759
  -794
  -828
  -863
  -898
  -934
  -970
  -1,009
  -1,048
  -1,089
  -1,132
  -1,177
  -1,225
  -1,275
  -1,327
  -1,382
  -1,441
  -1,502
  -1,567
  -1,636
  -1,708
  -1,784
  -1,864
  -1,949
  -2,039
  -2,133
  -2,232
  -2,336
  -2,447
  -2,563
Cash from investing activities, $m
  -887
  -1,196
  -1,274
  -1,354
  -1,437
  -1,521
  -1,609
  -1,698
  -1,793
  -1,890
  -1,991
  -2,097
  -2,207
  -2,323
  -2,443
  -2,568
  -2,700
  -2,838
  -2,982
  -3,133
  -3,292
  -3,458
  -3,632
  -3,815
  -4,007
  -4,209
  -4,420
  -4,642
  -4,874
  -5,119
  -5,376
Free cash flow, $m
  85
  421
  793
  1,185
  1,596
  2,027
  2,477
  2,947
  3,438
  3,951
  4,485
  4,862
  5,443
  6,050
  6,683
  7,345
  8,036
  8,759
  9,515
  10,307
  11,135
  12,004
  12,914
  13,869
  14,871
  15,922
  17,026
  18,185
  19,403
  20,682
  22,027
Issuance/(repayment) of debt, $m
  -190
  1,138
  1,182
  1,233
  1,284
  1,336
  1,389
  1,444
  1,501
  1,560
  1,621
  1,685
  1,752
  1,823
  1,897
  1,975
  2,057
  2,144
  2,235
  2,332
  2,434
  2,541
  2,655
  2,775
  2,901
  3,034
  3,174
  3,322
  3,477
  3,641
  3,813
Issuance/(repurchase) of shares, $m
  111
  251
  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
  1,389
  1,182
  1,233
  1,284
  1,336
  1,389
  1,444
  1,501
  1,560
  1,621
  1,685
  1,752
  1,823
  1,897
  1,975
  2,057
  2,144
  2,235
  2,332
  2,434
  2,541
  2,655
  2,775
  2,901
  3,034
  3,174
  3,322
  3,477
  3,641
  3,813
Total cash flow (excl. dividends), $m
  -123
  1,811
  1,974
  2,417
  2,880
  3,363
  3,867
  4,392
  4,939
  5,510
  6,106
  6,547
  7,195
  7,872
  8,580
  9,319
  10,093
  10,903
  11,750
  12,639
  13,569
  14,545
  15,569
  16,644
  17,771
  18,956
  20,200
  21,506
  22,880
  24,323
  25,841
Retained Cash Flow (-), $m
  -413
  -672
  -691
  -721
  -751
  -781
  -813
  -845
  -878
  -912
  -948
  -985
  -1,025
  -1,066
  -1,109
  -1,155
  -1,203
  -1,254
  -1,307
  -1,364
  -1,423
  -1,486
  -1,553
  -1,623
  -1,696
  -1,774
  -1,856
  -1,942
  -2,033
  -2,129
  -2,230
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
 
  1,271
  1,283
  1,697
  2,129
  2,582
  3,054
  3,547
  4,062
  4,598
  5,158
  5,561
  6,170
  6,806
  7,471
  8,165
  8,890
  9,649
  10,443
  11,275
  12,146
  13,059
  14,017
  15,021
  16,075
  17,182
  18,344
  19,564
  20,846
  22,194
  23,611
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
 
  1,181
  1,101
  1,333
  1,520
  1,660
  1,752
  1,799
  1,802
  1,765
  1,692
  1,540
  1,424
  1,290
  1,146
  997
  850
  710
  580
  464
  362
  276
  205
  148
  105
  72
  48
  31
  19
  12
  7
Current shareholders' claim on cash, %
  100
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

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 104.7
Price to Sales 4.3
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 37.4
Price to Free Cash Flow 78.3
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% 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 $36.0 billion.

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COMPANY NEWS

▶ Boston Scientific tops Street 2Q forecasts   [Jul-28-17 01:24AM  Associated Press]
▶ How Has Boston Scientific Stock Performed Recently?   [Jul-03-17 07:39AM  Market Realist]
▶ What Analysts Recommend for Boston Scientific   [08:44AM  Market Realist]
▶ Could Philips' Rivals Stage A Coup For Spectranetics?   [Jun-28-17 04:05PM  Investor's Business Daily]
▶ These Greater Washington CEOs are some of the country's highest rated   [12:00AM  American City Business Journals]
▶ [$$] Secondary Direct Manager Listings   [Jun-05-17 09:46AM  The Wall Street Journal]
▶ What Do Analysts Recommend for Boston Scientific?   [May-29-17 10:37AM  Market Realist]
▶ How BSXs Lotus Recall Developments Impacted Its Share Price   [May-26-17 04:35PM  Market Realist]
▶ Analysts Recommendations for Abbott Laboratories in May 2017   [May-25-17 03:54PM  Market Realist]
▶ Medtronic Tops Views On Q4 Sales, Earnings   [08:36AM  Investor's Business Daily]
▶ [$$] Companies Are Winning the Battle Over Adjusted Earnings   [May-23-17 12:52AM  The Wall Street Journal]
▶ [$$] Companies Winning the Battle Over Adjusted Earnings   [May-22-17 08:00AM  The Wall Street Journal]
▶ Which Stocks Are Showing Rising Relative Strength?   [May-19-17 04:45PM  Investor's Business Daily]
▶ Biotech And Pharma Industry And Stock News   [03:28PM  Investor's Business Daily]
▶ Boston Scientific In Buy Zone, Gets Stock Rating Upgrade   [12:11PM  Investor's Business Daily]
▶ Boston's Heart Valve Wins In Face-Off Trial With Rival Medtronic   [May-16-17 04:29PM  Investor's Business Daily]
▶ What Dragged down BSXs 1Q17 Margins?   [09:07AM  Market Realist]
▶ Boston Scientific is the 2nd biggest dealmaker in medtech since 2012   [May-04-17 02:25PM  American City Business Journals]
▶ Boston Scientific misses 1Q profit forecasts   [06:37AM  Associated Press]
▶ Edwards Rockets To 6-Month High On Strong U.S. Heart-Valve Sales   [Apr-26-17 04:35PM  Investor's Business Daily]
Stock chart of BSX Financial statements 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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