This software company is likely to offer better returns than Boston Scientific stock

OI think Intuitive action (NASDAQ: INTU), a financial and tax preparation software company, is currently a better choice over the medical device maker Boston Science Stock (NYSE: BSX), although INTU is the more expensive of the two with its P/S ratio of 11.2x, compared to 5.0x for BSX. We compare these two companies because of their similar revenue base. Although both companies have seen an increase in revenue over the past twelve months, growth has been much better for Intuit.

Looking at stock returns, Intuit’s 11% growth is more than BSX’s 6% growth over the past year. That compares to 6% growth in the broader S&P 500 index. While both companies are expected to experience continued revenue expansion, Intuit is expected to outperform. There’s more to the comparison, and in the sections below we explain why we believe INTU stock will outperform BSX stock over the next three years. We compare a host of factors such as historical revenue growth, returns and valuation multiple in an interactive dashboard analysis Intuit vs. Boston Scientific: Which action is a better bet? Parts of the analysis are summarized below.

1. Intuit’s revenue growth has been stronger

  • Both companies have managed to see their sales increase over the last twelve months. Yet Intuit experienced relatively faster revenue growth of 48% compared to just 20% for Boston Scientific. The Credit Karma acquisition boosted Intuit’s LTM revenue growth.
  • On a longer period, Intuit’s sales grew at a CAGR of 17.1% to $11.4 billion in the last twelve months, compared to $6.8 billion in fiscal 2019, while Boston Scientific’s revenue grew at a CAGR of 7.2% to $11.9 billion currently from $9.8 billion in 2018.
  • For Boston Scientific, revenue growth was supported by its left atrial appendage closure (LAAC) device – Watchman – which continues to gain market share from higher physician utilization. However, it is expected to face increased competition from Abbott in the future.
  • For Intuit, strong revenue growth in recent years can be attributed to more individuals and small businesses choosing to file their own taxes rather than consulting an accountant, particularly since the start of the Covid-19 pandemic. Additionally, in Q2FY21, the company acquired Credit Karma (now a separate reportable segment), which generated $416 million in revenue in Q1FY22. The segment offers personalized recommendations of credit cards, home, auto and personal loans, and insurance products, among others, to its customers. It generates revenue from cost-per-share transactions related to the issuance of credit cards and the financing of private loans.
  • Our Boston Scientific revenue and Intuit Revenue dashboards provide more information about business sales.
  • Going forward, Intuit’s revenue is expected to grow at a faster rate than Boston Scientific’s over the next three years. The table below summarizes our revenue forecasts for both companies over the next three years. It shows a CAGR of 12.0% for Intuit, versus a CAGR of 6.5% for Boston Scientific, based on Trefis Machine Learning analysis.
  • Note that we have different methodologies for companies negatively impacted by Covid and for companies not impacted or positively impacted by Covid when forecasting future revenues. For businesses negatively impacted by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery at the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed the three years preceding the Covid to simulate the return to normal conditions. For companies with positive revenue growth during Covid, we consider pre-Covid average annual growth with some growth weight during Covid and past twelve months.

2. Intuit is more profitable and offers less risk

  • Intuit’s operating margin of 22.5% over the last twelve months is much better than 10.9% for Boston Scientific.
  • Historically, Intuit’s operating margins have been higher than those of Boston Scientific. Its operating margin fell from 27.3% in fiscal 2017 to 22.5% currently, while Boston Scientific’s operating margin fell from 16.2% in 2018 to 10.9% today. Our Boston Scientific operating profit and Intuit operating profit dashboards have more detail.
  • Intuit’s free cash flow margin of 27.7% is higher than Boston Scientific’s 15.7%.
  • When it comes to financial risk, Intuit is better placed than Boston Scientific. Intuit’s 5.4% debt as a percentage of equity is well below 13.6% for Boston Scientific, while its 5.7% cash as a percentage of assets is in line with 6.0% for this latter, implying that Intuit has a better debt position and an equally good cash cushion.

3. Filet of Everything

  • We find that Intuit has demonstrated better revenue growth and profitability than Boston Scientific over the past few years, and has lower financial risk. However, the latter is available at a relatively lower valuation.
  • Now, looking at the outlook, using the P/S as a base, due to the large swings in both the P/E and the P/EBIT, we believe that INTU is currently the better choice of the two.
  • The table below summarizes our revenue and return forecasts for Boston Scientific and Intuit over the next three years and indicates an expected return of 43% for INTU over this period versus 9% expected return for BSX stock, which which implies that investors are better off buying INTU on BSX, based on Trefis Machine Learning analysis – Intuit vs. Boston Scientific – which also provides more detail on how we arrive at these numbers.

This software company is likely to offer better returns than Boston Scientific stock

While INTU stock may outperform BSX, the Covid-19 crisis has created many price discontinuities which may provide interesting trading opportunities. For example, you’ll be surprised how counter-intuitive stock valuation is to Medtronic versus Masco.

What if you were looking for a more balanced portfolio instead? here is a quality portfolio which has consistently beaten the market since late 2016.

Return March 2022
MTD [1]
YTD [1]
Total [2]
Back INTU -7% -32% 283%
Back to BSX -6% -2% 93%
S&P 500 return -4% -12% 88%
Performance of the Trefis MS portfolio -4% -14% 238%

[1] Cumulative monthly and cumulative annual as of 03/14/2022
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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