Wednesday, October 8, 2014

Medtronic Inc. 2

On my other blog I am today writing about possible cheap dividend stocks for October 2014 continue... I do not own this stock of Medtronic Inc. (NYSE-MDT). In 2009 I was looking for a good US stock for my US$ account. I had heard good things about this stock and also it is in Health Care sector which is a weak sector in Canada. Also, we just do not have the massive companies in Canada that the US has.

The insider trading record shows just $1.2M of insider selling and no insider buying. This is an extremely small amount of insider selling as compared to the market cap of this company. There is some insider ownership with the Chairman and CEO owning shares worth around $37M and the CFO owning shares worth around $12M.

For the year ending April 2014 outstanding shares were increased by 31M which is around 3.1% of the outstanding shares. This is a lot considering that most company increase outstanding shares for stock options around 0.50%. The corresponding value for 2013 and 2012 were an increase of shares by 10M and 1% and 4M and 0.40%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.91, 12.77 and 14.64. The corresponding 10 year Ratios are higher at 14.04, 19.10 and 21.58. The current P/E Ratio is 16.17 based on a stock price of $64.36 and 2015 EPS estimate of $3.98. This stock price test suggests that the stock price is relatively reasonable.

I get a Graham Price of $41.50. The 10 year low, median and high median Price/Graham Price Ratios are 1.19, 1.65 and 2.05. The current P/GP Ratio is at 1.55 based on a stock price of $64.36. This stock price test suggests that the stock price is relatively reasonable.

The 10 year Price/Book Value per Share Ratio is 3.20 and the current P/B Ratio is 3.35 based on BVPS of $19.23 and a stock price of $64.36. The current P/B Ratio is just 4.5% higher than the 10 year P/B Ratio. This stock price test suggests that the stock price is relatively reasonable.

If you look at the 5 year median dividend yield it is 2.46% and the current dividend yield at 1.90% is lower by 23% than the 5 year median dividend yield. This is based on a Dividend of $1.22 and a stock price of $64.36. This suggests that the stock price is relatively expensive.

However, if you look at the historical average dividend yield which is just 1.54% and the historical median dividend yield, which is 0.72%, the story changes a lot. By historical measures of the dividend yield, the current stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation out be a Buy. The 12 month stock price consensus is $73.60. This implies a total return of 16.25% with 1.90% from dividends and 14.36% from capital gains.

Sound bit for Twitter and StockTwits is: Stock price is reasonable. See my spreadsheet at mdt.htm.

This is the second of two parts. The first part was posted on Tuesday, October 07, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Medtronic is the world's leading medical technology company, pioneering device-based therapies that restore health, extend life and alleviate pain. Primary products include those for bradycardia pacing, tachyarrhythmia management, atrial fibrillation management, among others. Medtronic operates its business in one reportable segment, that of manufacturing and selling device-based medical therapies. The company does business in more than 120 countries. The company's product lines include cardiac rhythm management, neurological and spinal, vascular and cardiac surgery. Its web site is here Medtronic.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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