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Biotech / Medical : Boston Scientific (BSX) Any Comments??? -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (699)	10/27/1999 2:58:00 PM
From: Lighthouse	Respond to of 798

Thanks for the comments. The following is a rather longish, boring, thinking out loud process. RE: Balance Sheet I believe the balance sheet is in good shape. If we use a "rough" $1.20 EPS estimate for 2000 that equates to about $500 Million in earnings, plus apx. $190 million in depreciation and amortization. Operating cash flow should be near $690 million for 2000. There will be some cash drain for various items beyond capital expenditures say $50 million and some minor working capital charges with growing sales, say another $40 million, and capital expenditures of $165, that leaves apx. $335 to do whatever with (subject to change without notification by management - this is a rough back of the envelope calculation). Long term debt, excluding st commercial paper, stands at $761 at the end of the 3rd quarter. At this point the company can pay down the debt in apx. 2 years or invest in promising long term projects. I suspect that Tobin et all will opt to spend a fair amount of money on forward equity investments to ensure some long term opportunities. (I have never seen dividends disscussed for this company and I hope I never will) The working capital management so far this year has been very good and has allowed BSX to pay off debt faster than I thought. I too thought the stock offering at $40 was a bad price, necessary but bad. My entry point is the $18-$19 level where the balance sheet has already been repaired. Going forward I suspect that the LT debt will continue to go down, but not at a dramatic rate. Debt is always cheaper than equity. That being said, management will probably want to do stock deals from now on and that will require a higher p/e ratio of the stock in order to avoid big dilution. With a "smallish" R&D budget and lack of a new HUGE growth driver for the industry - to achieve revenue growth above 10% we will probably need acquisitions. Several of them. Our base is now $3 billion! I advocate BSX use the cash to invest in interesting projects and take the LT debt down to $400 million or so. Analysts always downgrade near the bottom. I read their reports for the good info they get from the company. With that info I derive a price I am willing to pay and I pay little or no attention to their buy/buy/buy or hold ratings. Sorry for the length. P.S. I bet they feel they way overpayed for Scheinder now. GDT and MDT are making headway in the Wallstent area.