HOLX – Base Case iCDS 117bps, Negative Case iCDS 217bps, 2028 4.625% Bond YTW of 4.063%, iYTW of 3.083%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

March 22, 2022

  • Cash bond markets are overstating HOLX’s credit risk with a YTW of 4.063%, relative to an Intrinsic YTW of 3.083% and an Intrinsic CDS of 117bps. Furthermore, Moody’s is overstating the company’s fundamental credit risk, with its speculative Ba1 credit rating two notches lower than Valens’ IG4 (Baa2) credit rating.

  • Incentive Dictate Behavior™ analysis highlights mostly positive signals for creditors. HOLX’s compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward.

  • Valens’ qualitative analysis of the firm’s Q1 2022 earnings call highlights that management is confident nearly 90% of U.S. COVID customers are running at least one other assay and that their vaginitis panel will be their most successful diagnostic launch ever, aside from COVID. Furthermore, they are confident they finished the year with non-GAAP net income and non-GAAP earnings per share that were significantly above prior top-end guidance expectations, and that expected EPS for the second quarter will land 36% above current consensus estimates.

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