Hologic Looks Reasonably Valued As Business Normalizes After The Pandemic

The pandemic is not completely finished, but the Street has nevertheless turned to the question of what the new normal will look like for Hologic (NASDAQ:HOLX) as high-margin COVID-19 testing fades. The pandemic left the company in an excellent position with respect to system placements, and I believe pandemic-driven placements will create a significant barrier to entry for newer systems. At the same time, normalizing procedure counts and improving component availability should help the surgical and imaging businesses.

Hologic shares are up about 10% since my last update, outperforming Abbott (ABT), Bio-Rad (BIO), bioMerieux (OTCPK:BMXXY), and Qiagen (QGEN) over that time. I expect long-term core revenue growth of around 5% to 6% from here for Hologic, but the company will have the liquidity to be more active in M&A if management can find suitable targets. I also see opportunity for higher margins from here, but the valuation anticipates a lot of this. Hologic is a good company and holding good companies at reasonable valuations can work long term, but I wouldn’t call this a screaming bargain.

 

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Hologic Looks Reasonably Valued As Business Normalizes After The Pandemic