How Stryker’s Stock Has Been Performing

Stryker (SYK) has been trading with mixed momentum recently. The stock is up 0.4% on the day and about 7.5% over the past week, but down roughly 10% over the past month.

Performance over longer periods is also uneven, with the stock declining about 16% over the past 3 months, 11.9% year to date, and 21.4% over the past year, while still showing a positive total return over the past 3 and 5 years.

At a share price of $306.76, Stryker’s recent 7-day share price return of 7.5% follows a weaker 30-day share price return that fell 10.1%, while the 1-year total shareholder return declined 21.4%. This indicates short term momentum after a tougher year for holders.

If you are comparing Stryker with other medical technology and related opportunities, it can help to scan companies exposed to similar themes such as robotics and automation using the 30 robotics and automation stocks.

With Stryker trading at $306.76 and indicators such as an intrinsic discount and a gap to analyst targets, the key question is: are you looking at an undervalued medical technology leader, or has the market already priced in future growth?

Most Popular Narrative: 5.2% Undervalued

According to a widely followed narrative from user Tokyo, Stryker’s fair value is set at $323.52, slightly above the last close of $306.76, which frames the stock as modestly undervalued on a discounted cash flow basis.

The fair price is calculated on a DCF model, based on the future Free Cash Flows. I use to focus on today’s FCF compared to in 3Y:

FCF 2024: $3.5b FCF 2027: $5.0b

And there we have it, SYK must deliver very well within the next three years.

This narrative focuses on earnings, free cash flow and projected return on equity, with a fair value built around sustained growth and firm margins rather than a stretch scenario. Readers who want more detail may look into how those elements combine into the $323.52 figure, including the assumptions on future profitability and the implied compounding return Tokyo is targeting.

Result: Fair Value of $323.52 (UNDERVALUED)

However, this hinges on Stryker meeting the free cash flow and earnings expectations Tokyo uses, and on return on equity staying close to the narrative’s assumptions.

Another View: Is Stryker Actually Expensive?

Tokyo’s DCF-based fair value of $323.52 points to modest undervaluation, but the P/E ratio tells a tougher story. At 35.2x earnings versus 29.2x for peers, 25.2x for the US Medical Equipment industry and a fair ratio of 31.2x, the stock screens as expensive. This raises the question of how much execution risk you are really comfortable with.

Next Steps

With sentiment split between risks and rewards, this is a moment to move quickly and check the underlying numbers yourself, starting with the 4 key rewards and 1 important warning sign

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.