1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Victor Selva
Victor Selva
Articles (150) 

What Drives St. Jude Medical to Be More Diversified?

April 30, 2014 | About:

St. Jude Medical Inc. (NYSE:STJ) is a global medical device company, which develops, manufactures and distributes cardiovascular medical devices.

In this article, let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment opportunity.

Long-Term Revenue Growth

We believe that product introductions will be an important reason for long-term growth. For example, the global launch of Optisure Defibrillation Leadwhich expands on the St. Jude Medical high-voltage product portfolio will provide an additional system enhancement for addressing lead complications and improving system reliability. “The Optisure lead has a thicker layer of Optim insulation that adds additional abrasion resistance to a lead that has already demonstrated excellent safety and reliability, backed by clinical evidence from St. Jude Medical as well as large, independent, multi-center studies,” said Dr. Raymond H. M. Schaerf, a thoracic and cardiac surgeon.


Global demographic trends, ageing population which implies a population that is getting a lot older in developed nations and the rapid urbanization of developing countries should support demand for cardiovascular health care.

Growth Opportunity

With respect to Atrial Fibrillation, the company’s products are used in invasive cardiology and other areas of medicine. It serves various markets, growing at a double-digit rate, driven by higher sales of mapping and ablation catheters and MediGuide technology.


The Cardiovascular Division participates in segments of the vascular and structural heart markets. Fractional Flow Reserve (FFR) and Optical Coherence Tomography (OCT) are two emerging technologies, which provide market opportunities, like the case of the ILUMIEN. This one is a platform that combines Fractional Flow Reserve (FFR) for measuring intra-arterial pressure with intravascular Optical Coherence Tomography (OCT) for a visual look inside arteries.

Analyst Recommendation

The firm is currently Zacks Rank # 3–Hold, and it also has a longer-term recommendation of “Neutral.” A Hold rating indicates that the stock, over the next one to three months, will perform at an annualized rate of 10.56%, which is very similar to the one projected for the S&P 500. For investors looking for a Zacks Rank Strong Buy, BioLife Solutions Inc. (BLFS) and Enzymotec Ltd. (NASDAQ:ENZY) are the options.

Relative Valuation, Earnings and ROE

In terms of valuation, the company sells at a trailing P/E of 25.1x, trading at a discount compared to the industry mean. Earnings per share (EPS) have increased by earning $2.5 versus $2.40 in the prior year. This year, Wall Street expects an improvement in earnings ($3.98 versus $2.50).

In the next graph we include the stock price because EPS often lead the stock price movement. As we can appreciate in the chart, the price performance showed an interesting upward trend in the last year.


Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has decreased from the same quarter one year prior. This is a clear sign of weakness within the company.

Let´s compare the current ratio with the peer group in the next table:


Company Name

ROE (%)


St. Jude Medical



Abbott Laboratories



Neptune Technologies & Bioressources Inc



Enzymotec Ltd


St. Jude has a good current ratio of 17.09% which is higher than the ones registered by Abbott Laboratories (NYSE:ABT),Enzymotec Ltd (NASDAQ:ENZY) and Neptune Technologies & Bioressources Inc. (NASDAQ:NEPT).

Final Comment

As outlined in this article, we expect St. Jude to continue with its industry leadership due to the launches of innovative products to boost sales, as well as taking advantage of some global macro trends and emerging technologies.

I would recommend investors to consider adding the stock for their long-term portfolios. Hedge fund gurus have also been active in the company in the fourth quarter of 2013. Paul Tudor Jones (Trades, Portfolio) has added the stock, while Andreas Halvorsen (Trades, Portfolio) and John Hussman (Trades, Portfolio) have bought it in that time frame.

Disclosure: Victor Selva holds no position in any stocks mentioned.

Rating: 5.0/5 (2 votes)



Please leave your comment:

Performances of the stocks mentioned by Victor Selva

User Generated Screeners

Doug Taylor<3 pe
nec5555Pat Dorsey Moat 5Y v1
nec5555Pat Dorsey Moat 5Y
opadovaniP Median2 No DIV
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat