One area companies are chasing right now is helping us live longer. Google Ventures President Bill Maris said a few months ago that humans may one day be able to live to age 500.
That’s where these life sciences companies come in, and there are some interesting opportunities for us as investors.
Edwards Lifesciences Corp (NYSE:EW) is one I really like right now. It leads the world in the science of heart valves and hemodynamic monitoring — also known as vascular surgery. The company is working on new technologies and products that treat structural heart disease. Edwards’ goal is to help people live longer, healthier and more productive lives.
Who can argue with that?
I love the heart-valve companies and have followed them for a very long period of time. In fact, I bought into EW last year and it was a juggernaut, making a lot of money in a short time. While it’s pulled back a bit recently — it’s trading about 15% from its 52-week high — I really like it here.
Drilling down into the numbers, you’ll notice that this company’s execution has been phenomenal. The company has beaten the Street in each of the last four quarters. In the most recent first quarter, sales increased 13%, gross margins increased from 72% to 77% and operating margins grew from less than 15% to 27.5%.
Those are impressive results, and EW pulled it off even with a higher tax rate.
Management also provided pretty good guidance for the future, so I’m very comfortable with where the stock is trading right now — as well as how it’s situated for the near term — from a risk/reward standpoint.
Having said that, I want to make it clear that EW is not cheap according to traditional valuation metrics. It trades at a forward price-to-earnings ratio of 28 and a price/earnings-to-growth ratio of more than 2.
And as you may know, the biotech sector has been quite volatile lately, so keep risk in mind as you think about this stock.
I’m looking for Edwards to continue gaining market and producing innovative treatments for heart disease, moving the stock higher over time. If we’re all going to live a lot longer, we’re going to need some extra cash along the way.
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