SYK Stryker Corporation
Quality medtech compounder, cheaper after a 20% drop, but price still well above intrinsic value.
The story
Stryker is a best-in-class diversified medtech franchise (orthopaedics with Mako robotics, instruments, endoscopy, neurovascular, medical equipment) that compounds through steady procedure growth plus serial tuck-in M&A. Its moat is surgeon relationships, installed robotic and capital-equipment base, and a broad hospital channel. It is a mature grower: high-single to low-double digit growth, margins still expanding as integration and mix improve.
Drivers are essentially unchanged: TTM margin of 22.4% keeps the path to 24% intact (margin_years cut from 6 to 5 because it is closer), and y1 growth edges up to 9% on continued near-10% organic plus M&A momentum. The share price falling from 337 to 270 does not change the fundamentals; acquisition-heavy reinvestment still holds sales-to-capital near 0.7.
Value drivers
| Revenue growth (Y1) | 9.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 7y |
| Target operating margin | 24.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.70 |
| Beta | 0.90 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.6% |
| Terminal WACC | 9.0% |
Valuation bridge
| PV of explicit FCFF | 14.45B |
| PV of terminal value | 48.51B |
| Equity value | 50.60B |
| ÷ shares → per share | $131.91 |
News
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- Stryker (SYK) Expanded Its Foot And Ankle Portfolio
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 28.16B | 9.0% | 22.7% | 4.60B | 3.32B | 1.28B | 1.18B |
| 2 | 30.44B | 8.1% | 23.0% | 5.04B | 3.25B | 1.79B | 1.52B |
| 3 | 32.62B | 7.2% | 23.4% | 5.48B | 3.12B | 2.36B | 1.84B |
| 4 | 34.66B | 6.2% | 23.7% | 5.90B | 2.91B | 2.99B | 2.15B |
| 5 | 36.51B | 5.3% | 24.0% | 6.30B | 2.64B | 3.66B | 2.42B |
| 6 | 38.12B | 4.4% | 24.0% | 6.58B | 2.30B | 4.28B | 2.60B |
| 7 | 39.45B | 3.5% | 24.0% | 6.81B | 1.91B | 4.90B | 2.75B |
Key risks
- Acquisition-driven reinvestment dilutes returns on capital and adds integration risk
- Hospital capex slowdown or reimbursement pressure on joint replacement volumes
- Competitive robotics push (ISRG, J&J, Medtronic) eroding Mako's orthopaedic lead
Catalysts
- Continued operating margin expansion toward 24%+ as integrations mature
- Mako expansion into new indications (spine, shoulder) driving implant pull-through