Given its better prospects, we believe MGM Resorts stock (NYSE: MGM) is a better pick than Boston Scientific stock (NYSE: BSX). That said, both stocks have the potential for robust gains in the next three years. Although these companies are from different sectors, we compare them because they have a similar revenue base of around $13 billion. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. Since these stocks are from different sectors, comparing P/S against one another may not be helpful. We compare their current multiples with the historical ones in the sections below to better gauge their valuations. We also compare a slew of other factors, such as historical revenue growth and operating margins, in an interactive dashboard analysis of Boston Scientific vs. MGM Resorts: Which Stock Is A Better Bet? Parts of the analysis are summarized below.
BSX stock has seen solid gains of 45% from levels of $35 in early January 2021 to around $50 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. BSX is one of a handful of stocks that have increased their value in each of the last three years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 18% in 2021, 9% in 2022, and 5% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 13% in 2023 – indicating an underperformance for the ticker in 2021 and 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the healthcare sector, including LLY, UNH, and JNJ, and even for the mega-cap stars GOOG, TSLA, and MSFT.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BSX face a similar situation as it did in 2021 and 2023 and lose value over the next 12 months – or will it see a strong jump?
1. MGM Resorts’ Revenue Growth Is Better
- MGM Resorts’ revenue growth has been better, with a 21.1% average annual growth rate in the last three years, compared to 6.3% for Boston Scientific
BSX
- After a decline during the pandemic, an uptick in total procedures has driven Boston Scientific’s top-line growth in recent years. It has also benefited from new product launches, including POLARx (Japan), Vercise, and XL valves.
- This trend is expected to continue going forward. Its recent acquisitions, including Baylis, will further bolster its top-line growth. The company has acquired a majority stake in Acotec, which will aid its future sales growth in China.
- MGM is seeing a recovery in Macau as pandemic restrictions in China have eased, with tourist footfalls into Macau and overall spending now on the upswing.
- Tourist inflows into the Las Vegas strip have also been improving. Customers have also been spending more on average at casinos, with average hotel room rates also trending higher.
- Looking at the last twelve months, MGM Resorts’ 24.7% sales growth has fared better than 8.7% for Boston Scientific.
- Our Boston Scientific Revenue Comparison and MGM Resorts Revenue Comparison dashboards provide more insight into the companies’ sales.
- Looking forward, Boston Scientific’s revenue is expected to grow at a CAGR of 6.3% to $16 billion in three years, aided by its new products. In comparison, MGM Resorts’ revenue will likely rise at a CAGR of 6.5% to $18 billion, driven by a recovery in Macau, based on Trefis Machine Learning analysis.
2. Boston Scientific Is More Profitable
- MGM Resorts’ reported operating margin contracted from 30% in 2019 to 11% in 2022. In comparison, Boston Scientific’s operating margin slid slightly from 14% in 2019 to 13% in 2022.
- Our Boston Scientific Operating Income Comparison and MGM Resorts Operating Income Comparison dashboards have more details.
- Looking at financial risk, both are comparable. MGM Resorts’ 51% debt as a percentage of equity is higher than 13% for Boston Scientific, but its 9% cash as a percentage of assets is higher than 1% for the latter, implying that Boston Scientific has a better debt position and MGM Resorts has more cash cushion.
3. The Net of It All
- We see that MGM Resorts has seen superior revenue growth and has more cash cushion. On the other hand, Boston Scientific is more profitable and has a better debt position.
- Now, looking at prospects using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe MGM Resorts will offer better returns compared to Boston Scientific over the next three years.
- Even if we compare the current valuation multiples to the historical averages, MGM fares slightly better. MGM Resorts stock trades at 0.9x trailing sales compared to its last five-year average of 1.4x, and Boston Scientific stock trades at 5.3x vs. the last five-year average of 5.9x.
- Our Boston Scientific Valuation Ratios Comparison and MGM Resorts Valuation Ratios Comparison have more details.
- The table below summarizes our revenue and return expectations for both companies over the next three years and points to an expected return of 20% for Boston Scientific over this period vs. a 24% expected return for MGM Resorts stock, implying that investors will likely be better off picking MGM over BSX, based on Trefis Machine Learning analysis – Boston Scientific vs. MGM Resort – which also provides more details on how we arrive at these numbers.
While MGM may outperform BSX in the next three years, it is helpful to see how Boston Scientific’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates
Read the full article here
