I do not own this stock of Medtronic PLC (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. This is one of the few US stocks that I follow. This stock has the financial year ending at the end of April each year. So, the financial year I am talking about is the one ending in April 2019.
When I was updating my spreadsheet, I noticed analysts still expect good increases in EPS, but not as high as previously thought. Last year the EPS estimates for 2020 and 2021 were $4.15 and $4.56 for EPS. This year, the estimates for 2020 and 2021 were $3.99 and $4.54. So lower for both years, but a lot lower for 2020 and 2021 is close. The 2019 EPS estimate was $3.79, but it came in at $3.41. Another notable thing is that the Debt Ratios are very good.
The dividend yield ranges from low (below 2%) to moderate (2% to 4% range). The current dividend is 2.01% with the 5, 10 and historical medians at 2.11%, 2.37% and 0.82%. The historical one is low because dividend yields were under1% until 2009. In 2009 there was a 50% increase in dividends. The dividend growth used to be in the Good range (15% and above), but is now in the moderate range (8% range to 14% range). See the chart below.
The Dividend Payout Ratios are fine. The DPR for EPS for 2019 is 59% with 5 year coverage at 62%. The DPR for CFPS for 2019 is 33% with 5 year coverage at 39%. Debt has been decreasing, as it was higher and with a ratio of 0.32 in 2016.
Debt Ratios are very good. The Long Term Debt/Market Cap Ratio for 2019 is 0.21. The Liquidity Ratio is very good and high at 2.59. The Debt Ratio is also very good and high at 2.27. The Leverage and Debt/Equity Ratios are also very good and low at 1.79 and 0.79.
The Total Return per year is shown below for years of 5 to 29 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 26.02, 29.02 and 32.17. The corresponding 10 year ratios are 19.44, 22.17 and 24.90. The corresponding historical ratios are 22.67, 26.44 and 31.28. The current P/E Ratios is 26.96 based on a stock price of $107.58 and an EPS of $3.99. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $58.07. The 10 year low, median, and high median Price/Graham Price Ratios are 1.29, 1.51 and 1.73. The current P/GP Ratio is 1.85 based on a stock price of $107.58. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.28. The current P/B Ratio is 2.86 based on a Book Value of $50,363M, Book Value per Share of $37.56 and a stock price of $107.58. The current ratio is some 26% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 0.82%. The current yield is 2.01% based on Dividends of $2.16 and a stock price of $107.58. The current yield is 145% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap
However, there is a problem with the dividend yield testing. They made a conscious effort to raise the yield on this stock in 2009 when they increased the dividend by 50%. The yield since then is 2.11%. This yield is 5% above the current yield of 2.01%. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.35. The current P/S Ratio is 4.58 based on 2020 Revenue estimate of $31,492M, Revenue per Share of $23.49 and a stock price of $107.58. The current ratio is some 37% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The dividend yield testing is the only test that says it is relatively reasonable. I noted one problem with this test above. Another problem is that the Dividend Payout Ratio has been increasing a lot. Dividends are growing faster than EPS. On the other hand, analysts expect that the EPS will be increasing nicely in the future. On the other hand, the most recent dividend increase was lower than the average for the past 5 years at 8%, with the 5 year increase at 12.30% per year.
Is it a good company at a reasonable price? This stock would seem to be a good one for both the dividend yield and growth and the capital gains shareholders have earned. For the 15 and 10 year capital gains that were low at 4.27% and 4.61%, the starting P/E Ratios were 30.38 and 94.73. I think that the stock price is probably expensive currently.
When I look at analysts’ recommendations, I find Strong Buy (12), Buy (7) and Hold (9). The consensus would be a Buy. The 12 month stock price consensus is $117.77. This implies a total return of 11.48% with 9.47% from capital gains and 2.01% from dividends.
See what analysts are saying on Stock Chase. Analysts like this company. Keith Speights on Motley Fool says the company has been raising dividends for 42 years.. A writer on Simply Wall Street says this stock has an intrinsic value of $93.95 which is close to the current value of $107.89, so current value is fair. A writer on Simply Wall Street says the view from 25 analysts is positive for this stock. Markets Insider Automation on Markets Insider says what Wall Street expects from this stock in the third quarter.
Medtronic Public Limited Company, headquartered in Dublin, Ireland, is among the world's largest medical technology, services, and solutions companies - alleviating pain, restoring health, and extending life for millions of people around the world. Its web site is here Medtronic Inc.
The last stock I wrote about was about was Canadian Pacific Railway (TSX-CP, NYSE-CP) ... learn more. The next stock I will write about will be Equitable Group Inc (TSX-EQB, OTC-EQGPF) ... learn more on Wednesday, October 16, 2019 around 5 pm. Tomorrow on my other blog I will write about Money Show 2019 – Lorne Steinberg.... learn more on Tuesday, October 15 around 5 pm.
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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.