Stock Analysis on Net

Boston Scientific Corp. (NYSE:BSX)

This company has been moved to the archive! The financial data has not been updated since May 4, 2023.

Present Value of Free Cash Flow to Equity (FCFE) 

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

Boston Scientific Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 12.03%
01 FCFE0 785
1 FCFE1 876 = 785 × (1 + 11.55%) 782
2 FCFE2 975 = 876 × (1 + 11.38%) 777
3 FCFE3 1,085 = 975 × (1 + 11.21%) 771
4 FCFE4 1,204 = 1,085 × (1 + 11.04%) 764
5 FCFE5 1,335 = 1,204 × (1 + 10.87%) 756
5 Terminal value (TV5) 127,008 = 1,335 × (1 + 10.87%) ÷ (12.03%10.87%) 71,961
Intrinsic value of Boston Scientific Corp. common stock 75,812
 
Intrinsic value of Boston Scientific Corp. common stock (per share) $52.73
Current share price $51.94

Based on: 10-K (reporting date: 2022-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Boston Scientific Corp. common stock βBSX 0.81
 
Required rate of return on Boston Scientific Corp. common stock3 rBSX 12.03%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rBSX = RF + βBSX [E(RM) – RF]
= 4.67% + 0.81 [13.79%4.67%]
= 12.03%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Boston Scientific Corp., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in millions)
Preferred stock dividends 55 55 33
Net income (loss) 698 1,041 (82) 4,700 1,671
Net sales 12,682 11,888 9,913 10,735 9,823
Total assets 32,469 32,229 30,777 30,565 20,999
Stockholders’ equity 17,573 16,622 15,326 13,877 8,726
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 5.07% 8.29% -1.16% 43.78% 17.01%
Asset turnover3 0.39 0.37 0.32 0.35 0.47
Financial leverage4 1.85 1.94 2.01 2.20 2.41
Averages
Retention rate 1.00
Profit margin 14.60%
Asset turnover 0.38
Financial leverage 2.08
 
FCFE growth rate (g)5 11.55%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × (Net income (loss) – Preferred stock dividends) ÷ Net sales
= 100 × (69855) ÷ 12,682
= 5.07%

3 Asset turnover = Net sales ÷ Total assets
= 12,682 ÷ 32,469
= 0.39

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 32,469 ÷ 17,573
= 1.85

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 14.60% × 0.38 × 2.08
= 11.55%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (74,674 × 12.03%785) ÷ (74,674 + 785)
= 10.87%

where:
Equity market value0 = current market value of Boston Scientific Corp. common stock (US$ in millions)
FCFE0 = the last year Boston Scientific Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Boston Scientific Corp. common stock


FCFE growth rate (g) forecast

Boston Scientific Corp., H-model

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Year Value gt
1 g1 11.55%
2 g2 11.38%
3 g3 11.21%
4 g4 11.04%
5 and thereafter g5 10.87%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 11.55% + (10.87%11.55%) × (2 – 1) ÷ (5 – 1)
= 11.38%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 11.55% + (10.87%11.55%) × (3 – 1) ÷ (5 – 1)
= 11.21%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 11.55% + (10.87%11.55%) × (4 – 1) ÷ (5 – 1)
= 11.04%