December 8, 2008 - Edwards Lifesciences Corp. (EW-NYSE) provides products and technologies designed to treat cardiovascular diseases. It focuses primarily on heart valve disease, peripheral vascular disease, and critical care technologies. The company offers tissue heart valves, such as pericardial and porcine valves, as well as repair products, including annuloplasty rings and systems, which are used to replace or repair a patient's diseased or defective heartvalve.

Edwards Lifesciences distributes its products through a direct sales force and independent distributors worldwide. It has a collaboration agreement with DexCom, Inc. to develop products for continuously monitoring blood glucose levels in patients hospitalized for various conditions. The company was founded in 1999 and is headquartered in Irvine, California.

In a market where most stocks show pricing graphs that look like the downward side of a roller-coaster ride, EW provides visual relief. Its price has held up for the last 8 years, going from a low of $12 in 2000 to a recent all-time high of $66.99. Over the last 3 years, when most other stocks have discovered lower levels, EW stayed within a relatively tight range of $41 to $52, only breaking out earlier this year to rocket to its new highs.

The reason? The usual suspects: higher sales and earnings, even with a global economic slowdown. Here's a breakdown of sales for the third quarter: total revenues, up 16% with 12% coming from actual growth and the rest in currency gains (56% of sales for the first 9 months of this year came from international orders). Heart Valve therapy increased by 21% for the third quarter. Critical Care sales gained by 14%. Cardiac Surgery, a smaller division, jumped to $21.4 million, and Vascular sales were up 5%. Total sales last year were $1.092 billion. Analysts predict this year will show $1.25 billion and $1.33 billion next year.

On the earnings side, they've grown by an annual average of 8.7% over the last 5 years. Analysts see annual average increases going to 15.5% over the next 5. In 2005, eps were $1.98, then $2.06 the next year, followed by $2.13. This year, expect $2.54 (based on the current average estimate of 14 analysts). Next year, they see $2.93. For the fourth quarter, ending December 31, look for 76 cents a share, up from 56 cents a year ago in the same quarter.

Edwards has helped its eps by buying back shares. Since the beginning of this year, it's spent $306 million on its stock, taking about 1 million shares off the market (total shares are 55.662 million). The company issued 2.7 million shares recently to redeem its senior convertible debt. With a strong cash flow and rather clean balance sheet (debt is only 19% of capitalization), expect more buy backs.

Some numbers: Market Cap is $2.6 billion. Trailing P/E is 25.5 but Forward P/E is 15.7. Price to Book is 3. Operating margin for the last 12 months was 15.46%, and Profit margin was 8.73%. Return on Equity was 12.55%. There's $214.5 million sitting in the cash drawer, making for $3.84 a share. Total debt is $203 million or about 20% of the balance sheet. Current ratio is 2.94. Book Value per share is $15.64. There is no dividend.

There is one recent concern to note: A U.S. senator, Charles Grassley from Iowa, is investigating whether a heart valve device made by EW is being used without proper FDA approval. Edwards has responded by saying that it has suspended shipments of the device and removed it from the company's Web site. The investigation continues.

Edward Lifesciences is growing in all the right ways, even with severe global economic headwinds. With enough cash to buy back more shares, earnings per share shouldn't have any trouble growing. If you're looking at medical devices, spend some time with Edwards. It's a smaller company that looks destined for bigger things.

Company Web site: www.edwards.com

- Ted Allrich