We've been asking ourselves recently if the market has placed a fair valuation on Edwards Lifesciences. Let's dive into some of the fundamental values of this Large-Cap Health Care company to determine if there might be an opportunity here for value-minded investors.
a Very Low P/E Ratio but Priced at a Premium:
Edwards Lifesciences Corporation provides products and technologies for structural heart disease and critical care monitoring in the United States, Europe, Japan, and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 27.61 and an average price to book (P/B) ratio of 3.69. In contrast, Edwards Lifesciences has a trailing 12 month P/E ratio of 26.9 and a P/B ratio of 5.53.
Edwards Lifesciences's PEG ratio is 2.71, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 42.5%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,723 | $4,348 | $4,386 | $5,232 | $5,382 | $6,005 |
| Gross Margins | 75% | 74% | 75% | 76% | 80% | 77% |
| Net Margins | 19% | 24% | 19% | 28% | 28% | 23% |
| Net Income (M) | $722 | $1,047 | $823 | $1,503 | $1,522 | $1,402 |
| Net Interest Expense (M) | $30 | $21 | $16 | $18 | $19 | $18 |
| Depreciation & Amort. (M) | $77 | $89 | $107 | $135 | $140 | $145 |
| Diluted Shares (M) | 641 | 637 | 632 | 631 | 624 | 609 |
| Earnings Per Share | $1.13 | $1.64 | $1.3 | $2.38 | $2.44 | $2.3 |
| EPS Growth | n/a | 45.13% | -20.73% | 83.08% | 2.52% | -5.74% |
| Avg. Price | $47.43 | $66.6 | $76.09 | $102.64 | $107.47 | $68.06 |
| P/E Ratio | 41.24 | 39.64 | 58.08 | 42.59 | 44.05 | 29.46 |
| Free Cash Flow (M) | $688 | $928 | $647 | $1,406 | $974 | $643 |
| CAPEX (M) | $239 | $254 | $407 | $326 | $245 | $253 |
| EV / EBITDA | 36.05 | 33.11 | 46.92 | 34.98 | 35.38 | 24.33 |
| Total Debt (M) | $594 | $594 | $595 | $596 | $596 | $597 |
| Net Debt / EBITDA | -0.15 | -0.47 | -0.59 | -0.15 | -0.09 | -0.33 |
| Current Ratio | 2.61 | 3.31 | 3.46 | 3.08 | 3.03 | 3.38 |
Edwards Lifesciences benefits from an excellent current ratio of 3.38, growing revenues and a flat capital expenditure trend, and wider gross margins than its peer group. The company's financial statements show a strong EPS growth trend and healthy leverage levels. Furthermore, Edwards Lifesciences has positive cash flows.
