Why Hologic Inc. Shares Could Stall

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Hologic  (NASDAQ: HOLX  ) sank 3% this morning after BTIG downgraded the medical diagnostics company from buy to neutral.

So what: Along with the downgrade, analyst Sean Lavin reiterated his price target of $26, almost exactly where the stock closed this past Thursday. So while momentum traders might be attracted to Hologic's price strength in recent months, Lavin's call could reflect a sense on Wall Street that the risks surrounding its growth trajectory are being largely overlooked.

Now what: According to BTIG, Hologic's risk/reward trade-off isn't too attractive at this point. "Several months ago, HOLX traded ~3 points below the group on an earnings basis. Now, the company trades with or above peers and has reached our $26 PT," said Lavin. "HOLX trades at ~17.6x NTM EPS vs. peers at 18.2x and due to debt has an EV/Sales of 4.3x vs. an average of 2.9x. While we do not feel shares are overvalued, we do not see valuation metrics that make sense here to offer the 15% upside required for a BUY rating." When you couple that seemingly stretched valuation with Hologic's still-hefty debt load, it's tough to disagree with BTIG's cautiousness. 

Leaked: This coming tech marvel could be a huge oppportunity
The best investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3019516, ~/Articles/ArticleHandler.aspx, 10/25/2014 11:28:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement