Boston Scientific Corporation (BSX), St. Jude Medical, Inc. (STJ), Medtronic, Inc. (MDT): This Medical Device Maker Seems to Be Quite Expensive

Medtronic, Inc. (NYSE:MDT) also has a lower valuation. At $55.60 per share, Medtronic, Inc. (NYSE:MDT) is worth around $56 billion on the market. The market values Medtronic, Inc. (NYSE:MDT) at around 13.50 times its forward earnings. Medtronic, Inc. (NYSE:MDT) is one of the leading companies in medical technology, operating in two main business segments: Cardiac and Vascular Group and Restorative Therapies Group. In fiscal year 2013, the Cardiac and Vascular Group generated nearly $8.7 billion, representing around 52% of its total sales.

In the near future, Medtronic, Inc. (NYSE:MDT) is aiming to derive significant growth from emerging markets. Emerging market revenue is expected to be around 20% of the total revenue in the next five years, with incremental revenue of $2.5 billion. Moreover, the company would keep focusing on cost reduction and improving the operating efficiency. In the period of 2012-2017, Medtronic expects to mitigate pricing pressure and maintain around 75%-76% gross margins. For full year 2018, Medtronic is estimated to produce more than $25 billion in cumulative free cash flow. At the current price, Medtronic offers its shareholders a dividend yield of 2%.

My Foolish take

Boston Scientific does not seem to be a good pick at its current price due to the relatively high forward earnings valuation, a lower long-term growth rate than the industry average, and no dividend payment. Among the three, I like Medtronic the most. Medtronic’s strategy, which focuses on cost savings and on increasing emerging market exposure, should help grow its business and improve the company’s profitability.

Anh HOANG has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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