Hologic, Inc.

HOLX Details

Hologic, Inc. (NASDAQ: HOLX) develops, manufactures, and distributes diagnostics, medical imaging systems, and surgical equipment focused on women's health. Its operating segments are 1) Diagnostics, comprising Aptima line of tests and HIV, Hepatitis B, and Hepatitis C Virus assays, 2) Breast Health segment, consisting of imaging and breast biopsy guidance systems, 3) GYN Surgical, providing NovaSure Endometrial Ablation System and MyoSure Hysteroscopic Tissue Removal System and 4) Skeletal Health, offering discovery and horizon X-ray bone densitometers and mini-C-arm imaging systems.

Latest News:

• Recent Launch: On November 04, 2021, HOLX launched its new Genius Digital Diagnostics System in Europe. The Genius Digital Diagnostics System is the next generation of cervical cancer screening, combining deep learning-based artificial intelligence (AI) with superior volumetric imaging technology to detect pre-cancerous lesions and cancer cells in women. It was intended to eradicate cervical cancer by providing actionable insights and improving workflow and lab efficiency.

FY21 Results:

• Surge in Revenues: HOLX's revenues increased by 49.14% to USD 5.63 billion in FY21 (ended September 25, 2021) compared to USD 3.78 billion in FY20 (ended September 26, 2020), attributable to growth in both product and services and other segments.
• Increase in Net Income: The FY21 net income increased to USD 1.87 billion from USD 1.11 billion in FY20.
• Cash and Debt Position: As of September 25, 2021, the company had cash & cash equivalents of USD 1.17 billion and total debt (including finance lease liabilities) of USD 3.05 billion.

Key Risk:

• Supplier Concentration Risk: HOLX depends on single third-party manufacturers for each of its key diagnostics instruments and a small number of suppliers for its key components or subassembly requirements. As a result, any breach of contract by vendors could harm the company's operations in the future.

Outlook:

• Q1FY22 Guidance: In Q1FY22, HOLX estimates to generate revenue of USD 1.10 – 1.15 billion, reflecting the decline of 31.7% – 28.6% YoY. It also estimates an EPS of USD 0.88 – 0.98 and USD 1.15 – 1.25 on a GAAP and Non-GAAP basis, respectively.
• FY22 Guidance: For FY22, HOLX expects to clock revenue in the range of USD 3.75 – 4.00 billion, reflecting the decline of 33.4% – 29.0% YoY. It also predicts its GAAP EPS to range between USD 2.50 – 2.80, along with non-GAAP EPS of USD 3.55 – 3.85.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HOLX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

HOLX's stock price has increased 21.98% in the past six months and is currently leaning towards the higher end of its 52-week range of USD 60.10 to USD 85.00. The stock is currently trading far above its 50 and 200 DMA levels, and its RSI Index is at 64.89. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 69.61.

Considering the significant uptick in the stock price, inadequate future outlook, and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 76.92, up 0.12% as of November 29, 2021, 01:46 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.    

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