Medtronic PLC (MDT, Financial) has recently experienced a daily loss of 1.77% and a 3-month decline of 3.16%, with an Earnings Per Share (EPS) of $3.14. Investors are keen to understand whether these figures signify that the stock is modestly undervalued. Through the lens of the GF Value, an intrinsic valuation measure, we delve into the true worth of Medtronic PLC (MDT). Join us as we analyze the company's financial health, profitability, growth prospects, and market positioning to determine if the current stock price reflects its fair value.
Company Introduction
Medtronic PLC (MDT, Financial) is a behemoth in the medical-device sector, innovating and manufacturing devices that address chronic diseases. Its diverse product range includes pacemakers, defibrillators, heart valves, and insulin pumps, among others. With foreign sales comprising about half of its total revenue, Medtronic PLC's global impact is substantial. We compare Medtronic PLC's current stock price of $83.06 to the GF Value of $92.39, aiming to uncover whether there's a mismatch between market price and intrinsic value.
Summarize GF Value
The GF Value is a unique valuation metric that assesses the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance forecasts. It serves as a benchmark for what Medtronic PLC's fair market value should be. When a stock trades significantly above this line, it's considered overvalued, which could lead to disappointing future returns. Conversely, trading below the line suggests undervaluation and potentially higher returns. With a market cap of $110.30 billion and a current price below the GF Value, Medtronic PLC appears modestly undervalued.
Because Medtronic PLC is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investors must consider a company's financial strength to avoid potential capital loss. Medtronic PLC's cash-to-debt ratio of 0.33 ranks lower than many of its peers, indicating a need for careful evaluation. The company's financial strength is rated 6 out of 10 by GuruFocus, reflecting a fair balance sheet.
Profitability and Growth
Consistent profitability correlates with lower investment risk, and Medtronic PLC has maintained profitability for the last decade. With an operating margin of 19%, ranking higher than most in its industry, the company's profitability score is a solid 7 out of 10. However, its revenue and EBITDA growth rates lag behind industry averages, which could be a concern for future growth prospects.
ROIC vs WACC
Evaluating the ROIC against the WACC gives insight into a company's ability to create value. Medtronic PLC's ROIC of 6.18 is just below its WACC of 6.41, suggesting the company may not be generating sufficient value for its shareholders. This comparison is a critical component of our valuation analysis.
Conclusion
In summary, Medtronic PLC (MDT, Financial) stock seems modestly undervalued. The company's financials are fair, and its profitability is commendable. However, its growth ranks below the median when compared to peers in the Medical Devices & Instruments industry. For a deeper dive into Medtronic PLC's financials, investors can explore the 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.
