Bausch + Lomb’s 24.2% return over the past six months has outpaced the S&P 500 by 15.6%, and its stock price has climbed to $16.93 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Bausch + Lomb, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Bausch + Lomb Not Exciting?
Despite the momentum, we're swiping left on Bausch + Lomb for now. Here are three reasons you should be careful with BLCO and a stock we'd rather own.
1. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Bausch + Lomb’s margin dropped by 26.8 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. Bausch + Lomb’s free cash flow margin for the trailing 12 months was negative 3.9%.
2. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Bausch + Lomb historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.2%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Bausch + Lomb burned through $196 million of cash over the last year, and its $4.95 billion of debt exceeds the $332 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Bausch + Lomb’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Bausch + Lomb until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Bausch + Lomb isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 20.4× forward P/E (or $16.93 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Like More Than Bausch + Lomb
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
/Apple%20logo%20on%20store%20front%20by%20frantic00%20via%20iStock.jpg)