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Is Hologic Stock's Low Valuation an Opportunity or a Value Trap?
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Key Takeaways
HOLX's forward P/S of 3.41X trails its median and peers, signaling a potentially attractive valuation.
HOLX posted a 1.2% revenue decline in the second quarter of fiscal 2025, with flat adjusted EPS.
Tariff pressures, HIV testing loss and lowered China forecast weigh on HOLX's fiscal 2025 outlook.
At a glance, Hologic (HOLX - Free Report) appears to be attractively priced, as reflected by its Value Score of B. The Marlborough, MA-based company, which specializes in women’s health products, is currently trading at a forward five-year price-to-sales (P/S) of 3.39X, lower than its median of 4.33X and the industry average of 4.14X.
HOLX Five-Year Forward P/S
Image Source: Zacks Investment Research
The valuation also compares favorably to peers QIAGEN (QGEN - Free Report) and Abbott (ABT - Free Report) , which have a P/S of 3.30X and 2.50X, respectively. Still, the stock trades at a premium to the broader Medical sector’s historical five-year average of 2.33X.
A tough macroeconomic environment, shifting policy landscape and soft end-market trends have created headwinds for the company since the beginning of fiscal 2025. Hologic shares are down 10.8% year to date, lagging behind the industry’s 7.8% decline and the S&P 500 composite’s 6.2% gain. In contrast, QIAGEN shares have risen 3.7%, while Abbott has outpaced all with its 18.1% gain in the same time frame.
YTD Snapshot: HOLX vs. Industry & Peers
Image Source: Zacks Investment Research
What’s Dragging Hologic’s Performance?
The company returned to top-line growth in the third quarter of fiscal 2024 after a prolonged period of COVID-19-related slowdown. However, fiscal 2025 has seen a mixed performance. First-quarter revenues rose just 0.9%, held back by an approximately $9 million headwind from a stronger U.S. dollar. The second quarter saw a 1.2% year-over-year decrease, mainly due to a 7.4% revenue drop in Breast Health revenues from lower sales of mammography capital equipment.
Hologic’s Molecular Diagnostics business also faced challenges from reduced HIV testing sales in Africa following the cease of USAID funding by the Trump administration. The $50 million annual revenue stream has now been conservatively removed from the company’s fiscal 2025 outlook. In cytology and perinatal businesses, strong U.S. adoption of the Genius AI product was offset by a modest decline internationally due to a physician strike in South Korea and reduced hospital spending in China. Meanwhile, after delivering sequential adjusted earnings per share (EPS) growth in recent months, Hologic reported flat EPS in the second quarter.
In the coming quarters, tariff-related pressures are expected to have a profound impact on Hologic’s operations. The company reaffirmed its revenue guidance but lowered its adjusted EPS forecast to $4.15-$4.25 from the prior $4.25-$4.35 range. Management expects a $20-$25 million quarterly gross impact tied to its manufacturing activities in Costa Rica and China. To minimize exposure to future geopolitical risks, Hologic cut its full-year China revenue forecast by approximately $20 million, now expecting around $50 million.
Hologic’s Earnings Estimate Revisions Slide
Analysts are turning increasingly cautious on Hologic’s earnings outlook. Over the past 90 days, the Zacks Consensus Estimate for the company’s fiscal 2025 EPS has decreased 2.1% to $4.19, while the consensus mark for fiscal 2026 has dipped 2.6% to $4.50. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Image Source: Zacks Investment Research
Meanwhile, both QIAGEN and Abbott’s 2025 and 2026 earnings estimates are displaying an upward trend.
Hologic’s Positives to Note
The company’s strategy of building durable growth drivers across each of its global businesses continues to pay off. Here are two key tailwinds that continue to stand out.
Strength in GYN Surgical: Hologic’s Surgical business has delivered a 7.6% compound annual growth rate (CAGR) over the last 10 years, led by its minimally invasive treatment of fibroids products — MyoSure and the related Fluent fluid management system. A key driver is the International business, which grew 16.2% in the fiscal second quarter, as Hologic advances market development and boosts awareness for its GYN offerings. NovaSure is seeing solid uptake overseas despite declining U.S. growth, while Accesa is growing faster than the core business. The January 2025 acquisition of Gynesonics enhanced the Surgical segment by bringing SOMATEX — a minimally invasive radiofrequency ablation tool to treat uterine fibroids that are less accessible by MyoSure or Accesa. In fiscal 2025, Hologic expects low-single-digit organic Surgical growth, supported by International momentum and the rising adoption of the new Fluent Pro Fluid Management System.
Solid Financial Health: The company’s fortress balance sheet and consistent cash flows give it ample strategic and financial flexibility. In the second quarter of fiscal 2025, Hologic generated $169.5 million in operating cash, driven by its market-leading brands. As of March-end, it had cash and equivalents of $1.43 billion, $192 million in short-term investments and an adjusted net leverage of just 0.8X. The company continues to look for tuck-in opportunities across its three core franchises, as seen with the recent deals like Endomagnetics and Gynesonics, as well as Biotheranostics (2021). Hologic also remains committed to returning value to shareholders, having repurchased more than $4.5 billion of stock since 2016, including $200 million in the second quarter.
Endnote on HOLX Stock
Hologic’s ongoing momentum in its Surgical division and financial stability are noteworthy, but macroeconomic headwinds have continued to weigh on its performance. The decline in Breast Health sales, the loss of the HIV testing business in Africa and China’s difficult operating landscape have impacted results. Despite an attractive valuation compared to peers and industry, the stock has underperformed both so far this year. The negative earnings estimate trend reinforces the outlook of continued near-term challenges. Considering all factors, Hologic doesn’t offer a very compelling investment case right now.
Image: Bigstock
Is Hologic Stock's Low Valuation an Opportunity or a Value Trap?
Key Takeaways
At a glance, Hologic (HOLX - Free Report) appears to be attractively priced, as reflected by its Value Score of B. The Marlborough, MA-based company, which specializes in women’s health products, is currently trading at a forward five-year price-to-sales (P/S) of 3.39X, lower than its median of 4.33X and the industry average of 4.14X.
HOLX Five-Year Forward P/S
Image Source: Zacks Investment Research
The valuation also compares favorably to peers QIAGEN (QGEN - Free Report) and Abbott (ABT - Free Report) , which have a P/S of 3.30X and 2.50X, respectively. Still, the stock trades at a premium to the broader Medical sector’s historical five-year average of 2.33X.
A tough macroeconomic environment, shifting policy landscape and soft end-market trends have created headwinds for the company since the beginning of fiscal 2025. Hologic shares are down 10.8% year to date, lagging behind the industry’s 7.8% decline and the S&P 500 composite’s 6.2% gain. In contrast, QIAGEN shares have risen 3.7%, while Abbott has outpaced all with its 18.1% gain in the same time frame.
YTD Snapshot: HOLX vs. Industry & Peers
Image Source: Zacks Investment Research
What’s Dragging Hologic’s Performance?
The company returned to top-line growth in the third quarter of fiscal 2024 after a prolonged period of COVID-19-related slowdown. However, fiscal 2025 has seen a mixed performance. First-quarter revenues rose just 0.9%, held back by an approximately $9 million headwind from a stronger U.S. dollar. The second quarter saw a 1.2% year-over-year decrease, mainly due to a 7.4% revenue drop in Breast Health revenues from lower sales of mammography capital equipment.
Hologic’s Molecular Diagnostics business also faced challenges from reduced HIV testing sales in Africa following the cease of USAID funding by the Trump administration. The $50 million annual revenue stream has now been conservatively removed from the company’s fiscal 2025 outlook. In cytology and perinatal businesses, strong U.S. adoption of the Genius AI product was offset by a modest decline internationally due to a physician strike in South Korea and reduced hospital spending in China. Meanwhile, after delivering sequential adjusted earnings per share (EPS) growth in recent months, Hologic reported flat EPS in the second quarter.
In the coming quarters, tariff-related pressures are expected to have a profound impact on Hologic’s operations. The company reaffirmed its revenue guidance but lowered its adjusted EPS forecast to $4.15-$4.25 from the prior $4.25-$4.35 range. Management expects a $20-$25 million quarterly gross impact tied to its manufacturing activities in Costa Rica and China. To minimize exposure to future geopolitical risks, Hologic cut its full-year China revenue forecast by approximately $20 million, now expecting around $50 million.
Hologic’s Earnings Estimate Revisions Slide
Analysts are turning increasingly cautious on Hologic’s earnings outlook. Over the past 90 days, the Zacks Consensus Estimate for the company’s fiscal 2025 EPS has decreased 2.1% to $4.19, while the consensus mark for fiscal 2026 has dipped 2.6% to $4.50. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Image Source: Zacks Investment Research
Meanwhile, both QIAGEN and Abbott’s 2025 and 2026 earnings estimates are displaying an upward trend.
Hologic’s Positives to Note
The company’s strategy of building durable growth drivers across each of its global businesses continues to pay off. Here are two key tailwinds that continue to stand out.
Strength in GYN Surgical: Hologic’s Surgical business has delivered a 7.6% compound annual growth rate (CAGR) over the last 10 years, led by its minimally invasive treatment of fibroids products — MyoSure and the related Fluent fluid management system. A key driver is the International business, which grew 16.2% in the fiscal second quarter, as Hologic advances market development and boosts awareness for its GYN offerings. NovaSure is seeing solid uptake overseas despite declining U.S. growth, while Accesa is growing faster than the core business. The January 2025 acquisition of Gynesonics enhanced the Surgical segment by bringing SOMATEX — a minimally invasive radiofrequency ablation tool to treat uterine fibroids that are less accessible by MyoSure or Accesa. In fiscal 2025, Hologic expects low-single-digit organic Surgical growth, supported by International momentum and the rising adoption of the new Fluent Pro Fluid Management System.
Solid Financial Health: The company’s fortress balance sheet and consistent cash flows give it ample strategic and financial flexibility. In the second quarter of fiscal 2025, Hologic generated $169.5 million in operating cash, driven by its market-leading brands. As of March-end, it had cash and equivalents of $1.43 billion, $192 million in short-term investments and an adjusted net leverage of just 0.8X. The company continues to look for tuck-in opportunities across its three core franchises, as seen with the recent deals like Endomagnetics and Gynesonics, as well as Biotheranostics (2021). Hologic also remains committed to returning value to shareholders, having repurchased more than $4.5 billion of stock since 2016, including $200 million in the second quarter.
Endnote on HOLX Stock
Hologic’s ongoing momentum in its Surgical division and financial stability are noteworthy, but macroeconomic headwinds have continued to weigh on its performance. The decline in Breast Health sales, the loss of the HIV testing business in Africa and China’s difficult operating landscape have impacted results. Despite an attractive valuation compared to peers and industry, the stock has underperformed both so far this year. The negative earnings estimate trend reinforces the outlook of continued near-term challenges. Considering all factors, Hologic doesn’t offer a very compelling investment case right now.
HOLX stock currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.