About Stryker
While Stryker sounds like a cool name to give to one’s child (depending on who you ask, of course), it is also the name of one of the largest designers, manufacturers and sellers of medical equipment, supplies and technologies thereof in the entire world.
Headquartered in Kalamazoo, Michigan, Stryker is in the business of dealing with practically any and all types medical devices and/or machines that can be found in what we would imagine basically any hospital worth its weight stethoscopes, as according to a page on the company’s website, Stryker sells hospital bed frames, disinfectants, seating solutions of all shapes, sizes and scenarios, medical instruments and what seems like essentially any piece of equipment that a doctor, nurse or any other medical professional would or could possibly need throughout their days.
As unexciting as it may be to some folks, we view medical equipment and other related products as being quite recession resistant, if not, dare we even say recession proof, to a large degree, as irrespective of the economic cycle (i.e., whether or not we are in a boom or bust cycle), people all across the globe will still need to go to the hospital and thankfully for a company such as Stryker, regardless of how frequently folks visit hospitals or their specialists, said entities will still need to have readily available equipment to deploy in order to help their patients, thus we deem demand for Stryker’s products to be fairly steady.
Additionally, as technology within the medical industry continues expanding, Stryker is a company that is definitely positioned to benefit from more and more innovation, as it is probably the case that more and more products and skus will be generated and thus more revenues to be claimed by a behemoth in the medical device space over time, acting as a potential growth catalyst for this more seasoned, steady specialty healthcare company.
All of this being the case, let’s make the most of the time we have been given and take a peek into this company’s core financials and other relevant metrics and ratios in hopes of determining whether or not Stryker’s stock (NYSE: SYK) is worth strongly considering as an investment for not only now, but the future.
Stryker’s stock financials
First and foremost, Stryker is trading at a share price of $264.49 with an associated market capitalization of $100.96 billion as well as a price-to-earnings (P/E) ratio of 37.56 along with an annually dished out dividend of $3.00 per share, initially indicating that Stryker is a gigantic company (given its $100+ billion market capitalization) as well as the fact that it pays to be large and boring, as one of the inherent perks is usually being able to distribute an annual dividend as large as $3.00 per annum, which the company can likely support (however, it is far from prudent to make such assumptions and of course, we will do some more digging to see just how generally stable this dividend is).
Diving a bit deeper into Stryker’s finances, the company’s executive team is in charge of handling and tending to approximately $36.9 billion in terms of total assets along with around $20.2 billion in terms of total liabilities, which, for such a large company with operations worldwide, this is a great balance sheet, as it implies shows that the company is employing some debt financing in order to continue growing its scale and operations but it is still undoubtedly total asset-heavy to the point of assuring our team that it will not become overleveraged or find itself swimming in too much debt and other liabilities and financial obligations anytime soon, which was somewhat expected but even better to have confirmed.
With respect to the company’s income statement, Stryker’s total annual revenues since 2018 have been singing a melodious tune over the last five or so years, as it has been able to grow its revenues at a steady pace, specifically, as its revenues stood at $13.6 billion in 2018, rising the following year to $14.8 billion, generally trending upwards to its latest reported and displayed figure (again, on TD Ameritrade’s platform) of $18.4 billion, as reported in 2022.
This is especially confidence invoking to us as this company’s hardly experienced any sort of decline or softening following the brunt of COVID-19, putting on full display its relative resilience in that it can certainly still grow its top-line throughout a crisis such as COVID but also keep revenue expectations realistic and following what has so far been the worst of the Pandemic, continue generating revenues.
There’s absolutely no way one could viably assert that this company is merely a COVID play, but rather, it is much more than that, seemingly being a durable, adaptive medical equipment and technologies company
Onto the state of the company’s cash flow statement, Stryker’s net income and total cash from operations figures speak volumes to the boringness of this company and its business model in the absolute best way(s) possible. More specifically, this company doesn’t seem to have much (if any) difficulty in generating cash from its operations, as this particular figure has ranged between around $2.2 billion (2019) to nearly $3.3 billion (2020), indicating that even through the thick of the prevailing supply chain issues during this era, Stryker was still able to generate a more than solid amount of cash, also hinting at the fact this medical device company likely has a rather strong trailing twelve month (TTM) net profit margin, also hinting at the fact that this company can afford to and sufficiently cover the dividend it presently pays out to its shareholders.
Stryker’s stock fundamentals
According to TD Ameritrade’s platform, Stryker’s TTM net profit margin is around eight percentage points greater than that of the industry’s displayed average of 5.02%, with the company’s standing at 13.92%, which is certainly a positive but one to frankly be expected of such a company with the pricing power, market share and overall presence this one has, not only in the United States but also overseas.
Additionally, TD’s platform also has the company’s TTM returns on assets and investment(s) standing at 7.38% and 8.68%, respectively, with the industry’s respective averages a bit lower at 5.42% and 6.14%, hinting at the fact that Stryker has done a better job at generating returns from the assets it owns and the investments it makes in comparison to the industry’s average performance in these regards.
Should you buy Stryker stock?
Stryker is a leader and its numbers certainly confirm this to be accurate.
Its balance sheet is in an excellent, total asset-heavy state, its total annual revenues have experienced some growth in recent years despite global, macroeconomic pressures and other challenges and headwinds, it is a cash flow generating machine and its core TTM return metrics and margins are leadership quality, undoubtedly.
All of these positives still, sadly, lead to employ this company’s stock (NYSE: SYK) with a “hold” rating, as while we do presume this company will continue growing its national and global presence as well as its product lines and offerings, its revenues indicate that it is not growing quickly enough to objectively justify paying for its shares at this current price level, given its present price-to-earnings ratio towering well over the fair value benchmark of 20.
Nevertheless, make no mistake about it, as once this company’s share price and intrinsic valuation start drifting closer to one another, it would be fair to assume that we will keep Stryker on our radar as a potential opportunity in the future.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.