Bausch & Lomb Corporation (BLCO)-A Bull Case Theory

In this article, we’ll summarize a bullish thesis posted on VIC covering Bausch & Lomb Corporation (BLCO) in late July when BLCO stock was trading at $15.83. Currently, BLCO stock is trading at $19.68, which is near its 52-week high of $21.69. So, BLCO stock has gained over 24% since the publication of this thesis. BLCO stock’s forward PE ratio (non-GAAP) is at 32.26, and the stock is trading at 1.48 times, trailing twelve-month (TTM) sales.

The thesis on Bausch & Lomb Corp. (BLCO) contends that the company is positioned for a robust upside ahead. Operating in three key segments; vision care (contact lenses and consumer eye health products), surgical equipment and consumables, and medications for eye conditions, BLCO leads worldwide in eye care. Bausch Health (BHC), the former parent company of BLCO, still owns an 88% market share. Hence, margin constraints resulting from large overhead expenses have impeded the stock performance despite its relatively strong market position.

The thesis underscores that BLCO is in a phase of operational and financial transition and that its problems are transient. With their sales cycles maturing, thereby improving margins, investments in new goods, including Miebo (released in 2023) and Xiidra (bought in 2023), are starting to pay off. The company recorded a significant rise in EBITDA margins in the first quarter of 2024, therefore reversing the declining trend seen in past years. The comments of management point to even more upside given strong sales momentum and upcoming potential guide changes.

The ultimate sale of BHC’s remaining share in BLCO, scheduled to take place within the next 18 months, is a vital element of the thesis. This deal would eliminate a major overhang on the stock, therefore boosting investor confidence and releasing value. According to the thesis, BLCO’s valuation will converge with those of industry colleagues like Alcon and Cooper as it keeps implementing operational enhancements.

The thesis suggests that BLCO’s strong growth trajectory and improved fundamentals place it well for significant gains over the medium term, even though hazards, including more general economic conditions and BHC’s financial situation, persist.

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Disclosure: None. This article was originally published at Insider Monkey.