HOLX – Base Case iCDS 127bps, Negative Case iCDS 241bps, 2028 4.625% Bond YTW of 5.919%, iYTW of 4.769%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
- Cash bond markets are overstating HOLX’s credit risk with a YTW of 5.919% relative to an Intrinsic YTW of 4.769% and an Intrinsic CDS of 127bps. 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.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. HOLX’s compensation framework incentivizes management to improve all three value drivers: revenue, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. In addition, all members of management are material holders of HOLX equity relative to their annual compensation, indicating they may be well-aligned with shareholders for long-term value creation.
- Earnings Call Forensics™ analysis of the firm’s Q2 2022 earnings call (4/27) highlights that management is confident base molecular revenue grew when excluding the impact of COVID, they will see benefits from increased supply early in 2023, and they expect other expenses to be slightly less than $25 million a quarter for the remainder of the year.