With a daily gain of 2.38%, a 3-month gain of 5.92%, and an Earnings Per Share (EPS) of 7.08, Stryker Corp (SYK, Financial) presents an intriguing investment opportunity. Is the stock fairly valued? This article provides a thorough valuation analysis to answer this question. Let's delve into the financials, operations, and market position of Stryker (SYK).
Company Introduction
Stryker Corp (SYK, Financial) designs, manufactures, and markets a diverse range of medical equipment, instruments, consumable supplies, and implantable devices. The company's product portfolio includes hip and knee replacements, endoscopy systems, operating room equipment, embolic coils, hospital beds and gurneys, and spinal devices. Stryker is a leading competitor in reconstructive orthopedic implants and holds the leadership position in operating room equipment. With just over a fourth of its total revenue coming from outside the United States, Stryker has a significant international presence.
Currently, Stryker's stock price stands at $296.43, while its GF Value, an estimation of fair value, is at $305.61. This comparison sets the stage for an in-depth exploration of the company's value.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides a visual representation of the stock's fair trading value.
According to GuruFocus Value calculation, Stryker (SYK, Financial) is fairly valued. At its current price of $296.43 per share and the market cap of $112.60 billion, Stryker's future return is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to assess a company's financial strength before deciding to buy shares. Stryker has a cash-to-debt ratio of 0.11, which ranks worse than 91.73% of 834 companies in the Medical Devices & Instruments industry. Based on this, GuruFocus ranks Stryker's financial strength as 5 out of 10, indicating a fair balance sheet.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, are less risky investments. Stryker has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $19.50 billion and Earnings Per Share (EPS) of $7.08. Its operating margin is 18.03%, which ranks better than 80.58% of 824 companies in the Medical Devices & Instruments industry. Overall, the profitability of Stryker is ranked 9 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Stryker is 7.2%, which ranks worse than 50.28% of 724 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 2.9%, which ranks worse than 59.45% of 730 companies in the same industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Stryker's ROIC is 9.63, and its cost of capital is 8.82.
Conclusion
In summary, Stryker (SYK, Financial) is believed to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 59.45% of 730 companies in the Medical Devices & Instruments industry. To learn more about Stryker stock, you can check out its 30-Year Financials here.
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