EW Stock Study (11-4-25)

Posted by Mark on February 18, 2025 at 06:59 | Last modified: November 4, 2025 11:31

I recently did a stock study on Edwards Lifesciences Corp. (EW, $83.07). The previous study is here.

M* writes:

     > Spun off from Baxter International in 2000, Edwards Lifesciences
     > designs, manufactures, and markets a range of medical devices
     > and equipment for advanced stages of structural heart disease.
     > It has established itself as a leader across key products,
     > including surgical tissue heart valves, transcatheter aortic
     > valves, and transcatheter mitral and tricuspid technologies. The
     > firm derives about 60% of its total sales from outside the US.

Over the last decade, the medium-size company has grown sales and EPS at annualized rates of 9.7% and 15.7%. Lines are mostly up, straight, and parallel despite sales decline in ’24, EPS dips in ’20 and ’23, and flat EPS three years and counting. Five- (10-) year EPS R^2 are 0.45 (0.89) and Value Line (VL) gives an impressive Earnings Predictability score of 100.

Over the last decade, PTPM leads peer and industry averages while ranging from 20.5 in ’18 to 32.8% in ’22 with a last-5-year mean of 28.3%. ROE leads peer and industry averages despite falling from 20.0% (’15) to 14.4% (’24) with a last-5-year mean of 21.0%. To complete the trifecta, Debt-to-Capital is much lower than peer and industry averages while falling from 19.3% (’15) to 6.5% (’24) with a last-5-year mean of 10.1%.

Quick Ratio is 3.5 and Interest Coverage is NMF (interest income exceeds interest expense) per M* who assigns “Narrow” Economic Moat, rates the company “Exemplary” for Capital Allocation, and gives a Financial Health grade of A (per BI website). Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 10.8% and 9.8% for ’25 and ’26, respectively (based on 31 analysts).
• Zacks projects YOY 0.8% and 9.8% for ’25 and ’26, respectively (12 analysts).
• VL projects 8.7% annualized growth from ’24-’29.
• CFRA projects 9.5% YOY and 9.9% per year for ’25 and ’24-’26, respectively.
• M* offers 2-year ACE of 9.4%/year and projects “high single-digit revenue growth for 2025 and beyond” in analyst note.

My 5.0% per year forecast is toward bottom of the range.

With regard to EPS growth:

• MarketWatch projects 5.5% and 7.7% per year for ’24-’26 and ’24-’27, respectively (based on 33 analysts).
• Nasdaq.com projects 11.0% and 12.0% per year for ’25-’27 and ’25-’28 (11 / 10 / 4 analysts for ’25 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 9.3%.
• Finviz gives ACE 5-year annualized growth of 9.8% (10).
• Argus projects 5-year annualized growth of 11.0%.
• LSEG gives LTG estimate of 9.4%.
• YF projects YOY 6.0% and 10.9% for ’25 and ’26, respectively (31).
• Zacks projects YOY 6.2% and 10.1% for ’25 and ’26, respectively (12), along with 5-year annualized growth of 8.6%.
• VL projects 9.9% annualized growth from ’24-’29.
• CFRA projects 6.2% YOY and 8.3% per year for ’25 and ’24-’26, respectively, along with a 3-year CAGR of 8.0%.
• M* projects long-term growth of 6.8% per year.

My 6.0% per year forecast is below the long-term-estimate range (mean of seven: 9.3%). Initial value is 2025 Q3 EPS of $2.28/share (annualized) rather than ’24 EPS of $2.34.

My Forecast High P/E is 35.0. Over the past 10 years, high P/E ranges from 37.1 in ’15 to 55.3 in ’21 (excluding 70.8 outlier in ’20) with a last-5-year mean of 47.9 and a last-5-year-mean average P/E (also excluding ’20 low P/E) of 37.9. I am below the range and at the upper end of my comfort zone.

My Forecast Low P/E is 25.0. Over the past 10 years, low P/E ranges from 25.2 in ’24 to 33.0 in ’21 (excluding 39.6 in ’20) with a last-5-year mean of 28.0. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $57.00 is default based on initial value given above. This is 31.4% less than the previous close and 12.2% less than the 52-week high.

These inputs land EW in the HOLD zone with a U/D ratio of 0.9. Total Annualized Return (TAR) is 5.2%.

PAR (using Forecast Average—not High—P/E) of 2.0% is less than the risk-free rate (T-bills). If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR but even that falls short of what I seek in a medium-size company.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 39 studies done in the past 90 days (my study and 16 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 7.7%, 8.3%, 35.0, and 25.0, respectively. I am lower on growth rates and equal on P/E range. VL projects a future average annual P/E of 32.0 that is greater than MS and mine (30.0).

MS high / low EPS are $3.56 / $2.39 versus my $3.05 / $2.28 (per share). My high EPS is less due to a lower growth rate. VL’s high EPS of $3.90 is greater than both.

MS LSPF of $59.80 is a virtual match with the default $2.39/share * 25.0 = $59.75 and 4.9% greater than mine.

MOS is robust because my inputs are near or below respective analyst/historical estimates/ranges and MS averages. Further substantiation is MS TAR 10.5% being 5.3%/year greater than mine.

With regard to valuation, PEG is 3.7 and 5.7 per Zacks and my projected P/E, respectively: both extremely rich (2.9 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.96. On another hand, the “quick and dirty DCF” has the stock undervalued by 24% and CFRA has a fair value for the stock near $160 (~92% higher).

Per U/D, EW is a BUY under $69/share. BI TAR criterion is met [106.8 / ((14.87 / 100 ) +1 ) ^ 5] = $53.40 with a forecast high price ~$107 (no dividend).

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