- Latest selections add five and cut four stocks
- Medical kit maker seen as an attractive option, Goldman says
- Returns on capital and equity at 17.8% and 21.6%
On Monday (3 Jun), analysts at investment bank Goldman Sachs did their monthly rejig of their US Conviction List, a curated selection of stocks the firm believes will outperform over the coming months.
Five stocks were added this time round, including energy plays Enphase Energy (ENPH:NASDAQ) and Sempra Energy (SRE:NYSE), property firm Brixmor Property (BRX:NYSE), plus automated tech testing kit supplier Teradyne (TER:NASDAQ).
The fifth, Edwards Lifesciences (EW:NYSE), looks a particularly interesting selection. This is a $53 billion medical technology company, specialising in artificial heart valves and hemodynamic monitoring equipment. Stockopedia gives the company an 89 out of 100 rank for quality and it’s not hard to see why.
Since 2018, revenues have consistently grown from $3.72 billion to 2023’s $6 billion, while net profit has roughly doubled to $1.41 billion. Operating margins run at around 25% and returns on capital and equity come in at 17.8% and 21.6% respectively.
CASH-RICH BUSINESS MODEL
Returns like this may be the reason why Edwards Lifesciences has been so far reluctant to pay shareholders dividends – they’re getting better bang for their buck by allowing management to reinvest excess capital back into business growth – but that could change.
The company ended 2023 with net cash of $1.1 billion and last year threw off $943 million of free cash flow, plus splashed $867 million on share buybacks.
Stockopedia data has the stock trading on a 2024 price to earnings (PE) of about 33, based on the overnight close of $87.86, but a three-year average PE (which better reflects double-digit growth forecast by analysts) comes out at 28, still a premium to the overall market but one that its quality metrics may suggest it deserves.
Goldman Sachs also cut four stocks from its June Conviction list, which were First Solar (FSLR:NASDAQ), Southern Company (SO:NYSE), Target (TGT:NYSE), and Simon Property (SPG:NYSE).
