Stryker Corp (SYK, Financial), a leading medical equipment manufacturer, has been experiencing a daily loss of -3.84%, and a 3-month loss of -6.8%. Despite these losses, the company has reported an Earnings Per Share (EPS) of 7.08. But is the stock modestly undervalued? This comprehensive analysis aims to answer that question by evaluating Stryker's intrinsic value, financial strength, profitability, and growth prospects. Read on to discover if Stryker (SYK) is a sound investment.
Company Introduction
Stryker Corp (SYK, Financial) designs, manufactures, and markets an array of medical equipment, instruments, consumable supplies, and implantable devices. The product portfolio includes hip and knee replacements, endoscopy systems, operating room equipment, embolic coils, hospital beds and gurneys, and spinal devices. Stryker remains one of the three largest competitors in reconstructive orthopedic implants and holds the leadership position in operating room equipment. Just over one fourth of Stryker's total revenue currently comes from outside the United States.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, 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 denotes the stock's ideal fair trading value.
According to GuruFocus Value calculation, Stryker (SYK, Financial) appears to be modestly undervalued. The stock price of $263.9 per share and the market cap of $100.20 billion suggest that Stryker stock is trading below its fair value. As Stryker is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with strong financial strength is less risky. Stryker's cash-to-debt ratio of 0.11 is lower than 92.44% of 833 companies in the Medical Devices & Instruments industry, indicating fair financial strength. Here's a look at Stryker's debt and cash over the past years:
Profitability and Growth
Investing in profitable companies carries less risk. Stryker has been profitable 10 years over the past 10 years, with an operating margin of 18.03% that is better than 81.08% of 830 companies in the Medical Devices & Instruments industry. However, the average annual revenue growth of Stryker is 7.2%, which ranks worse than 50.62% of 727 companies in the industry. The 3-year average EBITDA growth is 2.9%, which ranks worse than 59.86% of 730 companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Stryker's ROIC of 9.63 exceeds its WACC of 9.08, suggesting the company is creating value for its shareholders.
Conclusion
Overall, Stryker (SYK, Financial) stock appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks below average 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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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
