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Be Wary Of Edwards Lifesciences (NYSE:EW) And Its Returns On Capital
AInvestSaturday, Dec 7, 2024 9:23 am ET
4min read
EW --


Edwards Lifesciences (NYSE:EW) has been a prominent player in the medical device industry, but investors should be cautious about its recent performance and the potential implications for its returns on capital. While the company has seen steady revenue growth, its return on capital employed (ROCE) has been declining, raising concerns about its ability to generate value for shareholders.

Edwards Lifesciences' ROCE has decreased from 23% in 2019 to 17% in 2023, a significant drop that should give investors pause. This decline in ROCE suggests that the company's investments in capital expenditures and research and development may not be generating the expected returns. While Edwards Lifesciences has increased its capital expenditures and R&D expenses over the past five years, its revenue growth has been relatively modest, indicating that the company may not be effectively converting its investments into sales.

The company's operating margins have also been declining, from 32.5% in 2019 to 30.1% in 2023. This decrease in operating margins, combined with the decline in ROCE, suggests that Edwards Lifesciences may be facing challenges in managing its costs and generating profits. The company's gross margin has remained relatively stable, but its operating expenses have increased, indicating that it may be struggling to control its costs.

Edwards Lifesciences' recent acquisition of NuVasive has been a significant driver of its revenue growth, but it remains to be seen whether this acquisition will ultimately prove to be a successful strategic move. The company's focus on structural heart disease and critical care monitoring has been a strength, but the competitive landscape in the medical device industry is constantly evolving, and Edwards Lifesciences may face challenges in maintaining its market position.

Investors should also be aware of the potential risks associated with Edwards Lifesciences' exposure to the healthcare industry. The company's products are subject to regulatory approvals and reimbursement policies, which can impact its sales and profitability. Additionally, the company's dependence on a limited number of products and markets may make it more vulnerable to changes in the healthcare landscape.




In conclusion, while Edwards Lifesciences has seen steady revenue growth, its declining ROCE and operating margins should give investors pause. The company's investments in capital expenditures and research and development may not be generating the expected returns, and its recent acquisition of NuVasive remains a wildcard. Investors should carefully evaluate the company's prospects and consider the potential risks associated with its exposure to the healthcare industry before making an investment decision.
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