With a daily gain of 2.94% and an Earnings Per Share (EPS) of 7.08, Stryker Corp (SYK, Financial) presents a compelling case for evaluation. Is the stock fairly valued? Let's delve into a comprehensive valuation analysis to answer this question.
Introduction to Stryker Corp
Stryker Corp (SYK, Financial) designs, manufactures, and markets a wide range of medical equipment, instruments, consumable supplies, and implantable devices. The company's product portfolio spans from hip and knee replacements to endoscopy systems, operating room equipment, and spinal devices. Stryker stands as one of the three largest competitors in reconstructive orthopedic implants and leads in operating room equipment. Over a quarter of Stryker's total revenue comes from outside the United States.
With a stock price of $283.71 and a GF Value of $294.49, Stryker appears to be fairly valued. This comparison between the stock price and the GF Value, an estimation of fair value, sets the stage for a deeper exploration into the company's value.
Understanding the GF Value of Stryker
The GF Value is a proprietary measure providing an estimate of a stock's intrinsic value. It's computed based on historical trading multiples, a GuruFocus adjustment factor reflecting past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
At its current price of $283.71 per share, Stryker (SYK, Financial) has a market cap of $107.7 billion. The stock is estimated to be fairly valued, suggesting that the long-term return of Stryker's stock is likely to be close to the rate of its business growth.
Assessing Stryker's Financial Strength
Before investing in a company's stock, it's crucial to check its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. A look at the cash-to-debt ratio and interest coverage can provide insights into a company's financial health. Stryker's cash-to-debt ratio stands at 0.14, which is lower than 90.51% of companies in the Medical Devices & Instruments industry. With a financial strength rank of 5 out of 10, Stryker's financial health is considered fair.
Profitability and Growth of Stryker
Companies consistently profitable over the long term offer less risk to investors. Stryker has been profitable 10 years over the past decade. Over the past twelve months, the company had a revenue of $19.5 billion and Earnings Per Share (EPS) of $7.08. Its operating margin is 17.5%, ranking better than 78.88% of companies in the Medical Devices & Instruments industry. With a profitability rank of 9 out of 10, Stryker exhibits strong profitability.
Growth is a crucial factor in a company's valuation. Stryker's 3-year average annual revenue growth is 7.2%, ranking better than 50.07% of companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth rate is 2.9%, ranking worse than 59.61% of companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Stryker's ROIC stands at 9.42, while its WACC is 8.69. When the ROIC exceeds the WACC, it implies value creation for shareholders.
In conclusion, Stryker Corp (SYK, Financial) stock appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks lower than 59.61% of companies in the Medical Devices & Instruments industry. For more information about Stryker stock, you can check out its 30-Year Financials here.
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