Medtech Stryker (SYK) and Boston Scientific (BSX)

I was supposed to do a comparison, but instead i am sharing my notes on them: Data sheets 1a. Simple Valuation of Stryker (SYK) this opens to a reddit page 1b. Simple Valuation of Boston Scientific (BSX) this opens to a reddit page 2. Tearsheet Valuation of Stryker & Boston Scientific this opens to a google sheet 3a. SYK L2-Ai Slop. (worth reading section is the "etc" portion) this opens to a google docs 3b. BSX L2 -AI Slop (worth reading section is the "etc" portion) this opens to a google docs (since Reddit bot doesnt like links in the main post, i am going to post the links in the comment page) ======= These two companies are on my watchlist, and i bought Stryker since 2nd half 2024. **The case for investing in Stryker:** \+ Very predictable performance. The 28 years of earnings history show that they can do 11-13% every year with roughly 95% accuracy. (see TS for Log Linear regression) \+ The Moat is stronger than BSX, they are taking market share from Zimmer Biomet, JNJ's Depuy which is being spun off, and Smith + Nephew. \+ Management seem to be able to anticipate stuff. Eg. They sucessfully diversified to other areas so that during covid, while business was impacted it was not scary, and they made money from consumables, in fact their business is very much a shaver + blades business model. **The case against investing in Stryker:** \- They got hit by a hack in the latest quarter and their nos are impacted. In fact management guided that this impact will continue till the 2nd half before it is normalised. The cyber hack caused consumerables sales to be lost to competitiors while larger items were deterred. The most pronounced deterioration has been the margin compression. It sounds scary but management is contrite during the concall and is confident they can fix it. \- Their growth is slowing as they grow bigger, ROE was 18% in the first 5 of the last 10 years and in the last 5 years the ROE is around 15%. EPS CAGR used to be 13% but is now analyst are estimating around 10-11% for the next 5 years. \- Valuation wise, it was richly valued historically because the business is very predictable and not because of its high growth. Mathematically, if the results are very predictable, then the valuation duration can stretch out from 5 years to maybe 10 or 15 years, and this raises the valuation upwards. However, despite a historical 5 year average p/e of 45 where it is only at 35 currently, morningstar and cfra are estimating this company as a 5 year-only duration company (in line with the medtech industry). In other words, it is at fair value by analysts even though it is cheap when compared to the historically. **The case for investing in Boston Scientific:** \+ They are the first mover in several technologies which they hold significant market share. (eg. The non-thermal Pulsed Field Ablation (PFA) which they pioneered) or in "Left Atrial Appendage Closure (LAAC) space, the WATCHMAN franchise holds an estimated 70% market share". These technologies comes with high switching costs. \+ The CEO is worth the whole investment thesis. If you look at BSX's earnings linearity betweebn 2000 to 2025, it was really horrible, they had around 6% eps growth accurate 43% of the time. However, if you just focus on the period between 2010 to 2025, the EPS growth CAGR shoots up to 16% 85% of the time. What happened ? Between 2000 and 2010 ? Well they acquired Guidant, and found that the company had products that were subpar, and they struggled with the integration, and to make matters worse, they were accused of accounting irregularities. Enter Mike F. Mahoney, he was brilliantly hired away from JNJ where he served as the worldwide chairman of medical devices and diagnostics division Depuy. Needless to say, he restructured the company, forbade any large M&A but okayed smaller adjacent M&As to strengthen the moat. He is 61, and Lucy Diamonds think that he won't step down until 2028 or 2030 at the earliest, especially since their CFO retired in 2025. \+ The stock isn't expensive. They have been doing 12% a year for the last 10 years, and 16% for the last 15 years. Analysts forecasts CAGR of EPS between 11+ to 16% a year for the next 5 years. If i were to use a conservative 10%- 11% EPS growth for the next 5 years, the fair value works out to $71 - $74.65. Morningstar has the fairvalue at $81. and CFRA at $67.63. The recent price was $57. **The case against investing in Boston Scientific:** \- I think the main gotcha is that the sector is become tech-like, getting heavy on the the capex and the competition is getting vicious. Many of the systems introduced are binary, either you win and you set the standard or someone else does it. This doesnt contradict my first point above, its like you discover Compact Flash and have an advantage for 3 to 5 years and then your competitor intodroduces SD-Cards and you lose big time overnight. Here is a table compiled for me by Lucy Diamons (this is in the L2 document) |Competitor|Projected 2025 PFA Market Share|Projected 2026 PFA Market Share|Year-Over-Year Trend| |:-|:-|:-|:-| || ||||| |**Boston Scientific (FARAPULSE)**|58%|48%|Declining (-10%)| |**Medtronic (PulseSelect / Affera)**|28%|29%|Flat/Slight Gain (+1%)| |**Johnson & Johnson (Varipulse / Omnypulse)**|11%|20%|Surging (+9%)| |**Abbott (Volt)**|3%|3%|Flat (0%)| \- BSX is experiencing some execution hiccups, and had to call down this year's nos as well as next quarters's. This, after lapping the highest sales quarter last year in Q4, is quite an embarrassment. The CEO (and CFO) somewhat apologised that it was uncharacteristic of them to call down numbers, and they did not take it lightly. [](https://www.reddit.com/submit/?source_id=t3_1tlbcyp&composer_entry=crosspost_prompt)