NEW YORK (TheStreet) -- Given my recent love affair with medical device companies, I was recently asked for my opinion on, I was recently asked for my opinion on Edwards Lifesciences (EW), which has seen its stock plummet close to 10% since the company reported third-quarter earnings results that -- by the way -- beat Street estimates.
Since the stock peaked in October 2012 at around $109, shares have been on a steady decline, losing close to 40%.
While I do believe these shares are fairly valued following this pullback, the question is how much of the recent decline was an overreaction to the company's guidance? Or are there real fundamental challenges investors would just rather not deal with?
Before we dive into Edwards' numbers, it's worth noting Edwards was at one point an obscure entrant in areas like tissue heart valves and critical care monitoring. These were markets that were dominated by giants like Abbott Labs (ABT), St. Jude Medical (STJ) and Intuitive Surgical (ISRG). But Edwards' management had bigger ambitions, and the Street was completely sold.
Following the footsteps of some of its rivals, namely St. Jude, Edwards' management seemingly got bored with the company's "old way" of doing things. Looking to generate higher margins and deliver more profits, management decided to move the company away from its legacy operations to focus instead on areas like transcatheter aortic valve implantation (TAVI), which (at the time) was considered a breakthrough in medical technology.