What happened

Shares of Edwards Lifesciences (NYSE:EW) soared over 52% last year, according to data provided by S&P Global Market Intelligence. The company, which specializes in medical devices used to address structural heart disease, delivered impressive revenue gains and steadily improved full-year 2019 guidance with each quarterly update. That allowed the growth stock to easily beat the 28.8% rise of the S&P 500 in 2019.

Management believes growth should continue for the foreseeable future. As of December, Edwards Lifesciences expected to reach the top end of its full-year 2019 revenue guidance range of $4 billion to $4.3 billion. The company sees revenue increasing 10% to 12% in 2020. 

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So what

In the first nine months of 2019, Edwards Lifesciences grew revenue 15.6% compared to the year-ago period. Operating income rose only 10% in that span, primarily due to a 22% increase in research and development expenses. The company is investing heavily in the future as it races to capture an expected $10 billion opportunity in transcatheter valve therapy by 2024. 

So far, so good. Edwards Lifesciences generated $700 million in revenue from its transcatheter aortic valve replacement (TAVR) portfolio in Q3 of 2019, which represented 64% of total revenue during the period and marked a 26% increase compared to the year-ago quarter. 

Now what

Edwards Lifesciences is now valued at $49 billion -- nearly double its market valuation from the beginning of 2018. On the one hand, the business operates in a high-margin niche with relatively large obstacles to entry. On the other hand, the stock is valued at 38 times forward earnings. While the S&P 500 is trading at a historic premium as well, investors might not be too surprised to see shares cool off if the broader economy slows. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.