Boston Scientific’s growth story- Ageing population - Rising procedures

Boston scientific has been on our watchlist for more than a year. But the high valuation of the stock meant that we were never able to get in on their growth story. However more recently, following earnings the stock has sold off and this has piqued our interest. We are going to be closely watching the stock and see if it will start a bottoming process. We have already entered the stock but that is just a nibble. We need to see the stock bottom out before increasing the stake. If the price continues to fall, we will continue to add to our positions gradually. We are not afraid to be in draw down as we are very convinced with the growth story. The more the market sells off, the more we will be interested in.

The above image shows the percentage of deaths due to a particular cause from birth and we want you to focus on the 60+ age group onwards. The leading causes of death are due to cardiovascular disease, Respiratory disease and malignant neoplasm. Also data shows that people start to access healthcare more often after they reach the age of 60. You can see this on the slide below which shows healthcare expenditures by age in EU. Not only that the countries with biggest populations like China, India and Indonesia is also rapidly ageing.

The above graph shows the rise in life expectancy in India. As the affluence of developing countries grow, the life expectancy increases and this means that the usage of healthcare and spending on healthcare increases. Here comes the important point. Their populations are several times bigger than the ageing western economies. This is a mega megatrend. And the companies that are exposed to this megatrend and bound to do well in the coming years. This is the growth story of Boston Scientific.

The above chart is taken from Boston Scientific investor presentation. As you can see the growth since 2014 has been tremendous and was achieved both through innovation and through strategic acquisitions. As the world ages rapidly, rising medical procedures in this subset of population will drive earnings growth in Boston Scientific. We can expect low double digit growth in revenues for more than a decade with increasing revenues from developing economies like India and Indonesia

Cardiology accounts for majority of the revenues. The other important business subunit is the Endoscopy unit. As the technology improves, we predict that more procedures would be done endoscopically which results in lower complications. Boston scientific has put a lot of focus in this unit and have several new procedures on trial. Although US accounts for majority of the earnings, as the developing nations age, we can see earnings growth coming from these economies.

It is important to remember that even after the share price falls, Boston Scientific still trades at a high PE of 39 and so we have to be cautious here. Stryker is trading at a higher multiple of about 45 and Johnson & Johnson the lowest at PE of 22. But Boston scientific has higher earning growth compared to the other two. We think that Boston Scientific is a stock that should be on any investors watchlist and portfolio

Analysis done in good faith and not investment advice. May the Peace of the Lord be with you all.