E Edwards Lifesciences: Near-Term Techno-Fundamental Metrics

Edwards Lifesciences (EW) is a prominent player in heart valves technology and cardiovascular critical care. In Q2 2020, the company beat revenue estimates by $133 million and EPS estimates by $0.15 (operating income basis). The stock is currently trading at $76.94 as of August 7, 2020, a price that is near its all-time high of about $82.50. Over 20 analysts have upped its target price while none has ventured to mark it down.

The stock has gained strength in the recent past and is looking formidable – but can it be bought now? Should investors wait for a correction? Here is my analysis that takes into account charts, fundamentals, option chain, and news.

News Analysis

EW has recently settled an intellectual property dispute with Abbot Laboratories (ABT) by booking a pretax charge of $368 million in Q2 2020. The company also will incur royalty expenses of $100 million between now and 2024, which will be accounted for as cost of sales. EW has paid $100 million cash payment to Abbot in July 2020, and the balance will be paid in the future.

The company estimates that its sales will remain flat in 2020 as compared to 2019.

EW’s Valuation

Investors and analysts fancy EW because of its profitable products, robust pipeline, and long-term prospects. There’s no doubt the company will do great in the long run – however, this post analyzes the stock from a near-term perspective and attempts to answer whether EW’s current price is a buy.

Image Source: Seeking Alpha

EW is currently richly valued because its market price has been driven up by investors eager to invest in a stock with massive potential. A TTM PE of 42.74, TTM PEG of 17.28, TTM P/B of 12.45, and TTM Price-to-Sales of 11.11 suggest the stock is overvalued in the near term – so long you don’t compare it with Tesla.  

EW Chart & Option Chain Check

(a) Weekly Chart Signals

Image Source: Investing.com

This chart shows that both the shorter-term 5-week EMA and the longer-duration 25-week EMA are rising. The 5-week EMA is above the 25-week EMA and the price has closed above both these averages. This suggests that the stock could be in strong hands with its near-term support levels placed at $75.60 and $72.59.

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Disclosure: I have no position in the stocks discussed, and neither do I plan to buy/sell it in the next 72 hours. I researched and wrote this article. I am not being compensated for it (other ...

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Sunil Tinani 2 months ago Author's comment

Agree. When current growth is flat but prospects are great, one can always invest in a SIP

Mad About Money 2 months ago Member's comment

Interesting perspective. I had never really thought about it quite like that.