Stock (Symbol)

Stryker (SYK)

Stock Price

$114

Sector

Healthcare

Data is as of

August 22, 2016

Expected to Report

Oct 27

Company Description

Stryker Corporation is a medical technology company. The Company offers a range of products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes.
Source: Thomson Financial

Sharek’s Take

Back in the 1990’s Stryker (SYK) was considered to be a 20% grower. But 2007 was the last time the manufacturer of replacement joints, surgical equipment and hospital beds grew annual profits by 20%. Since then the company would have a solid year of 12-18% profit growth, followed by a flatter year of 0-8% growth. With 2016 going good, profits are expected to climb 13% this year. Next year? Right now analysts expect 11% growth, with 16% and 11% growth the first 2 qtrs of 2017. So yes, it seems SYK can keep the double-digit growth going. Stryker has compiled 37 straight years of record sales growth and is cash rich. The company uses its money wisely to buy back stock, pay a dividend of 1.4%, and make acquisitions — I love three pronged attacks like this. With the help of recent acquisitions, Stryker might be back-on-track with long-term double-digit growth. Overall SYK has an estimated long-term growth rate of 11% a year in addition to a 1.3% dividend. At $114, the stock is between my 2016 & 2017 Fair Values of $109 & $122.

One Year Chart

Stryker produced 16% profit growth last qtr — and beat the 13% estimate — on 17% sales growth which was much better than the 5% sales growth 2QtrsAgo. Investors weren’t overjoyed and the stock came down a bit after earnings, which was probably because the P/E was a little high. 2016 profit estimates jumped from $5.61 to $5.76 last qtr, and remained at $5.76 this qtr. Qtrly profit estimates are: 10%, 12%, 16% and 11%.

Fair Value

This stock sells at 20x earnings which is slightly rich. My Fair Value is 19x earnings, or $109.

Bottom Line

Stryker has done well with acquisitions that are boosting profits. Investors have taken notice and pushed the stock higher, a tad bit higher than it should be. But it does look like SYK has a good chance of delivering double-digit profit growth this year, next year, and for the long-term. SYK ranks 24th of 36 stocks in the Conservative Portfolio Power Rankings.