HOLX – Base Case iCDS 83bps, Negative Case iCDS 123bps, 2028 4.625% Bond YTW of 6.079%, iYTW of 5.069%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

August 9, 2023

  • Credit markets are overstating HOLX’s credit risk with a YTW of 6.079% relative to an Intrinsic YTW of 5.069% and an Intrinsic CDS of 83bps. Furthermore, Moody’s is overstating the company’s fundamental credit risk, with its speculative Ba1 credit rating three notches lower than Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights 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 increased cash flows available for servicing obligations going forward. In addition, management members 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 Q3 2023 earnings call (7/31) highlights that management is confident Breast Health’s Q4 performance will yield similar double-digit revenue growth as Q3.

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