Edwards Lifesciences (NYSE:EW) is a little-known medical device company that produces medical hardware including aortic valve replacements, blood sampling systems, and surgical recovery equipment. Though established medical device companies like Edwards may not be the first place that would-be investors look to find companies with a chance of massive growth in the medium-term, there are still several important tidbits that investors should know about before they write the company off.
The case in favor of Edwards being a millionaire-maker
There are a handful of promising features about Edwards Lifesciences for investors seeking a millionaire-maker stock, all of which stem from the company's highly effective core business. With trailing 12-month revenue of $4.48 billion, 13.7% quarterly revenue growth year over year, and a profit margin of 24.7%, Edwards is both a steadily growing and an efficiently operating company. Unlike many of its peers, Edwards has only $675.2 million in debt compared with $1.03 billion in cash on hand, meaning it won't have any problem continuing to expand its operations or acquiring smaller competitors while servicing its debts.
Edwards' products will likely continue to experience sales growth as the company attains regulatory approval in the United States and China. Expanding existing approvals for new indications will also be a driver of growth. In 2019, the company received U.S. Food and Drug Administration (FDA) approval to expand the indications of one of its heart valve replacement products, paving the way for higher revenue.
Subsequently, the FDA also gave Edwards the green light to start early trials of one of its other valve replacement products, laying the groundwork for other future revenue streams. Last year, Edwards invested 17.3% of its net sales in research and development, ensuring that the company's product offerings and product indications will continue to expand in the future.
The case against Edwards being a millionaire-maker
That said, there are two pieces of data that indicate Edwards may not make anyone a millionaire. First, the company has a trailing 12-month price-to-earnings ratio of only 40.2, which is lower than the biotech industry's average of 77.3. This may mean that the market expects Edwards to experience slower stock growth compared to other companies in the industry.
Second, Edwards is probably too large a company to experience the kind of rapid growth that is necessary to turn a relatively small investment into millions of dollars. With a market cap of $44.3 billion and more than 50 years in operation, Edwards is organizationally very distinct from a start-up on the verge of taking off.
Though Edwards' stock has handily beat the market over the past three years, it hasn't posted triple-digit price growth, nor is the company's management planning any major shift in strategy that might pave the way for such growth. In the same vein, Edwards posted an impressive 18% growth in sales revenue last year -- but that's nowhere near the level of growth required to cause a massive rush of investment that would drive up the company's stock price, based on the market's lack of reaction to the news.
Edwards may not make you rich, but it might make you wealthier
Edwards may have been a millionaire-maker back when its stock price was much lower. Now that the company is mature, steadily expanding its core operations won't deliver fast enough growth to make any millionaires. But investors shouldn't give up on Edwards just yet, as it still warrants a buy as a company with strong fundamentals and a set of products that are in demand.
Edwards posted double-digit sales growth for every year of the 2010s, and its first-quarter sales data suggest that this trend will continue. Even if it probably won't make you a millionaire, Edwards is still a sound investment, and the company's stock likely has a bright future in the years to come.