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Hologic Looks Iffy For Now

Apr. 08, 2018 3:38 PM ETHologic, Inc. (HOLX)4 Comments
William Daniel profile picture
William Daniel


  • A falling share price and low P/E after a string of consecutive earnings beats make HOLX look attractive.
  • HOLX has reduced its debt and is consistently growing revenues and net income.
  • Unfortunately, a narrow moat and stiff competition, along with weak organic growth, make the company just a HOLD in my view.
  • A strong R&D pipeline and sterling image as a champion of women's health aren't enough to draw me in without a dividend in this choppy market.
  • Revenues and earnings have been lifted by tax cuts and recent acquisitions, explaining the too-good-to-be-true valuation.

Hologic Inc. (NASDAQ: NASDAQ:HOLX) is a Bedford, Mass.-based company founded in 1984 that describes itself as a champion of women’s health. The company seeks to “help improve and save lives through early detection and proactive treatment.” Shares of Hologic have taken a tumble of late, falling from January highs of over $44/share to just $36.43/share, after an almost 3% drop on Friday.

ChartHOLX data by YCharts

When I saw the company now trades at a P/E ratio under 10 and has seen significant revenue and net income growth for the past four years, my interest was piqued. Unfortunately, when I dug a little deeper I found a company that has a narrow moat which leaves it at risk in an exceedingly competitive industry. I also found HOLX was buoyed by tax cuts and acquisitions which make its current P/E and EPS figures fairly useless. The recent earnings beats may not be as impressive as they seem. Still, it’s not all negatives at Hologic; in fact the company’s improving financial strength, impressive reduction in debt, strong R&D pipeline and 21st century appeal undoubtedly make it one to watch. As for now, without a dividend to draw me in, I am unconvinced by flailing recent acquisitions and concerned by a narrow moat with strong competition. I see HOLX's long-term prospects as bright, but for now the company is just a HOLD in my view as it has a lot to prove in the coming months.

Source: Hologic

The Business

Hologic is a developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products. The company proudly focuses on women’s health through its five operating segments: Diagnostics, Breast Health, Medical Aesthetics, GYN Surgical and Skeletal Health. 2017 was a transitional year for HOLX. On January 31, 2017 the company sold its blood

This article was written by

William Daniel profile picture
Fortune Markets and Economy Reporter. Prev. Business Insider Investing Reporter. MS Business Journalism. I'm mostly a passive investor these days(and I think you probably should be, too), but I still "seek alpha" with a portion of my portfolio.The more I learn, the more I realize just how much I have to learn. Do your own research...blah, blah, blah...*some quotes about investing or something*

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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