Stryker Corp (SYK, Financial) has recently shown a daily gain of 2.79% and a 3-month gain of 3.78%. With an Earnings Per Share (EPS) of $6.74, investors may wonder if the stock is fairly valued. This article delves into the valuation analysis of Stryker, providing a clear perspective on its current market standing and future prospects.
Company Introduction
Stryker Corp (SYK, Financial) is a prominent player in the medical equipment industry, designing, manufacturing, and marketing a diverse range of medical devices and supplies. Its extensive product portfolio includes orthopedic implants, endoscopy systems, operating room equipment, and more. With a significant portion of its revenue generated from international markets, Stryker stands as a key competitor in the global medical devices arena. Balancing the current stock price of $291.55 against the GF Value of $307.12, we set the stage for an in-depth analysis of Stryker's intrinsic value.
Summarize GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a benchmark for the stock's fair trading value. When a stock's price significantly exceeds this line, it may be overvalued, suggesting a potentially lower future return. Conversely, a price well below the GF Value Line could indicate a higher future return. Currently, Stryker's market cap is $110.80 billion, and its stock price suggests it is fairly valued, hinting at a long-term return that could mirror the company's business growth rate.
Financial Strength
Investors must consider a company's financial strength to avoid the risk of permanent capital loss. Stryker's cash-to-debt ratio of 0.15 ranks lower than 89.86% of its industry peers, reflecting a fair financial position with a score of 5 out of 10. The following chart illustrates Stryker's debt and cash trends over recent years, providing insight into its financial stability.
Profitability and Growth
Investing in profitable companies, particularly those with consistent profitability, tends to be less risky. Stryker has maintained profitability for the past decade. With a revenue of $19.90 billion and an operating margin of 18.33%, Stryker outperforms 82.53% of its industry competitors, securing a strong profitability rank of 9 out of 10. However, its growth, with an average annual revenue increase of 7.2%, falls behind 50.14% of the Medical Devices & Instruments industry, demonstrating room for improvement in this area.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insights into its value creation. Stryker's ROIC over the past 12 months stands at 9.34, slightly above its WACC of 9.16, indicating the company's capability to generate cash flow effectively relative to the capital invested.
Conclusion
In conclusion, Stryker (SYK, Financial) appears to be fairly valued. The company showcases solid financial health and robust profitability, although its growth performance could be stronger. For a more detailed financial overview, interested investors can review Stryker's 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.
