Guidant's (GDT) primary concern is for the faint of heart. The company makes a range of devices for cardiac patients, including pacemakers, defibrillators and stents that help open blocked arteries and keep them that way. But it isn't a stock for day-traders.
The company recently pulled the plug on its intended $3 billion buyout of Cook Group., Inc., after a drug-coated stent they were developing together delivered disappointing results. That leaves Guidant pretty much on the sidelines as rivals Johnson & Johnson and Boston Scientific take the drug-coated stent market and run with it.
Analysts at Dow Theory Forecasts acknowledge that the abandoned buyout is bad news. But they say that Guidant's other business units are in tip-top shape -- they're developing plenty of new products and churning out double-digit sales growth. Looking past the stent debacle, they say, shares of Guidant are trading cheaply relative to their peers. According to the newsletter, the stock is still a good long-term prospect.
Indeed, Guidant's financials look solid. Revenues have been rising steadily since 1997. The company has little debt and delivers a robust 30% return on equity. Although earnings are forecast to slip slightly this year, analysts polled by Thomson Financial/First Call expect 15% earnings growth, on average, over the next three to five years.
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