The last five years have not been particularly happy ones for Boston Scientific (NYSE:BSX), or for its shareholders. Indeed, the medical devices manufacturer has delivered a profit (in terms of adjusted earnings per share) in only three of the last five years. However, cumulative losses in the other two years represent a significant majority of profit in the other three years, meaning total profit for the period (even on an adjusted basis) is pretty low.
Furthermore, the company's share price has not done all that much better, although at least it is higher than where it was five years ago. Still, share price gains of 61% are still some way off those of the S&P 500, which has posted capital gains of more than 150% during the same period.
But wait... growth at last
However, things seem to be looking up for shareholders in Boston Scientific! After an undoubtedly tough time, the company is forecast to grow EPS by 10% in 2014, and by as much as 20% in 2015. This is substantially above the average growth rate of the S&P 500 (which remains in the mid-single digits), and is comfortably better than anything the company has delivered in its recent past.
Furthermore, despite experiencing a challenging period, Boston Scientific remains financially sound. For instance, the company's debt-to-equity ratio is only moderately high at 65% (which means that for every $1 of net assets, Boston Scientific's balance sheet carries $0.65 of debt), and this shows just how conservative management has been with regards to how the business has been financed in recent years.
Indeed, it may have been tempting to take more risk and borrow a greater amount (especially with interest rates being so low), but Boston Scientific's balance sheet remains in surprisingly good health and ready to take advantage of the aforementioned above-average growth prospects that are forecast during the next two years.
Not a sector-wide problem
Of course, sector peers such as Abbott Laboratories (NYSE:ABT) and St Jude Medical (NYSE:STJ) appear to be in better shape that Boston Scientific. For instance, Abbott Laboratories has been profitable throughout the last five years, and is forecast to grow EPS by 9% in 2014, and by 12% in 2015 -- just shy of Boston Scientific's forecast growth rate.
Likewise, St Jude hasn't had the profitability issues of Boston Scientific; in other words, it has also made a profit in every year of the last five. It is also set to deliver EPS growth over the next two years. While EPS growth forecasts for St Jude are slightly below those of Abbott Laboratories and Boston Scientific (at 6% in 2014 and 8% in 2015), they remain above the S&P 500 average.
Performance not reflected In share prices
However, both St Jude and Abbott Laboratories have underperformed the S&P 500 during the last five years, with Abbott Laboratories gaining just 42%, and St Jude posting capital gains of 76% (S&P +150%). These numbers are either side of Boston Scientific's 61%, which highlights just how poorly all three stocks have performed during the last five years, but also how much potential they have to narrow this underperformance in the future.
Indeed, all three stocks have bright prospects. However, Boston Scientific could prove to be the winner this year, since it's the company with the most room for improvement, and the biggest turnaround potential. As such, while all three stocks could beat the S&P 500 this year, Boston Scientific could be the one to watch, as well as a great stock, through the rest of 2014.
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Peter Stephens has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.