Edwards Lifesciences Corporation (EW) is the global leader in patient-focused medical innovations for structural heart disease and critical care monitoring. The company markets its products in the U.S. and internationally. It is a manufacturer of heart valve systems and repair products used to replace or repair a patients’ diseased or defective heart valves.

EW operates through the following segments – Transcatheter Aortic Valve Replacement (TAVR), Transcatheter Mitral and Tricuspid Therapies (TMTT), Surgical Structural Heart, and Critical Care.

EW fared well in 2020, with decent revenue and income growth. The company will host a conference call on January 27 to discuss financial results for the fourth quarter and full year 2020 ended December 31, 2020. In the third quarter, the company posted top-line revenue of $1.1 billion, which grew  4% year-over-year. Moreover, its adjusted EPS came in at $0.51, rising 9% compared to the year-ago value.

The stock has gained nearly 5.6% in the past year. This performance along with potential upside based on several factors have helped EW earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates EW:

Trade Grade: A

EW is currently trading near its 50-day moving average of $86.27 but higher than its 200-day moving average of $78.60, which indicates that the stock is in an uptrend. In fact, the stock’s 7.7% returns over the past three months reflect short-term bullishness.

In December, EW announced that the first patient had been treated in its  RESTORE clinical trial, which will evaluate the safety and effectiveness of its  investigational HARPOON Beating Heart Mitral Valve Repair System. . The HARPOON system uses a less-invasive technique than open-heart surgery  to treat a type of heart disease called severe degenerative mitral valve regurgitation, which occurs when there is damage to the mitral valve that prevents proper functioning of the valve.

In the last reported quarter, EW reported global TAVR sales of $745 million, representing an increase of 6% year-over-year. Its TAVR growth was led by continued adoption of the Edwards SAPIEN valve platform and a step-up in procedure volumes as newly diagnosed patients entered the system and were treated. The company witnessed therapy adoption across all geographies, with notable strength in Europe.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, EW is well positioned. The stock is currently trading 6.7% below its 52-week high of $92.08.

Over the past three years, the stock has returned more than 106.1% due to its innovating healthcare infrastructure and efficient supply-chain management. In fact, EW’s top-line and EPS increased at a CAGR of 9.6% and 3.4%, respectively, over that period.

EW is currently focusing on the advancement of three key value drivers – the company’s portfolio of differentiated therapies, favorable real-world clinical outcomes, and results from rigorous trials that will ultimately support therapy approvals and adoption.

EW continues to advance the commercialization of its Pascal System in Europe and remains focused on physician training, procedural success and patient outcomes. In the last reported quarter, the company generated $12 million in global sales of TMTT as it resumed activation of new centers in Europe and increased its commercial procedures. However, management believes the TMTT opportunity is significant and expects it to become a $3 billion global market by 2025.

Peer Grade: C

EW is currently rated #66 of 186 stocks in the Medical – Devices & Equipment group. Other popular stocks in this group are Align Technology, Inc. (ALGN), Varian Medical Systems, Inc. (VAR) and Insulet Corporation (PODD). While EW has gained 9.8% over the past six months, VAR, PODD and ALGN have returned 35.3%, 42.8% and 68%, respectively, over this period.

Industry Rank: B

EW is part of the StockNews.com Medical – Devices & Equipment industry, which is ranked #33 of 123 industries. The companies in this industry manufacture equipment and supplies, including surgical and medical instruments, dental equipment, and surgical appliances. Pandemic-driven lockdowns caused a big declined in surgical procedures as patients canceled elective surgery. This hurt the demand for surgical supplies. But as mass vaccination picks up pace, and given that some treatments be deferred indefinitely, we believe this industry is well positioned to see significant demand in the coming quarters.

Overall POWR Rating: A (Strong Buy)

Overall, EW is rated a “Buy” due to its impressive financial performance, robust current and future demand for its products, underlying industry strength and short and long-term bullishness, as determined by the four components of our overall POWR Rating.

Bottom Line

The pandemic has severely impacted the global healthcare system. However, the industry is evolving and has been revolutionizing the treatment of several diseases through the integration of technology. In line with this  progress, EW continues to aggressively pursue breakthrough therapies for patients with structural heart diseases and critical illnesses. Moreover, demand for the company’s products used in cardiac surgeries has rebounded sharply since the emergence and deployment of effective coronavirus vaccines because patients are more willing to seek heart valve surgery now and hospitals ability to manage surgical patient flow is rebounding.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for EW. The average broker rating of 1.62 indicates favorable analyst sentiment. Of the 25 Wall Street analysts that rated the stock, 13 have given it a “Buy” rating. Analysts further expect EW’s current year revenue and EPS to grow 16.2% and 13.8%, respectively. This outlook should help EW witness significant returns this year.

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EW shares were trading at $86.05 per share on Tuesday morning, up $0.16 (+0.19%). Year-to-date, EW has declined -5.68%, versus a 2.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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