Stryker stock (NYSE: SYK), a medical devices company, has seen a 15% fall this year, in line with the broader S&P500 index, down 17%. Even if we look at the longer term, SYK stock, with 46% returns from levels seen in late 2017, has aligned with the S&P 500 index, up 48%. However, we believe that StrykerSYK
still has more room for growth, as discussed below.

This 46% rise for Stryker stock since late 2017 can primarily be attributed to 1. Stryker’s revenue rising a significant 42% to $17.6 billion over the last twelve months, compared to $12.4 billion in 2017, 2. a 3% rise in the company’s P/S ratio to 4.9x trailing revenues currently, compared to 4.7x in 2017, partly offset by 3. a 2% rise in its total shares outstanding to 379 million. The increase in revenue and shares outstanding has meant that Stryker’s revenue per share rose 40% to $46.49 over the last twelve months, vs. $33.31 in 2017. Our dashboard on Why Stryker Stock Moved has more details.

Stryker’s sales growth over the recent years has been driven by new product launches, such as – Surgi-Count+ – a surgical sponge counting system. Last month, it launched Insignia Hip Stem and Power-PRO 2 ambulance cot. The new launches are likely to aid its revenue growth going forward.

The company’s revenue growth has also been buoyed by the acquisition of Wright Medical, a medical device company, in late 2020. Earlier this year, Stryker agreed to acquire Vocera Communications – a company focused on communications systems for the healthcare industry.

Stryker has seen its operating margins expand to 13.2% for the last twelve-month period, compared to just 1.9% in 2017. That said, the metric is below the 18.2% figure seen in 2019, before the pandemic. The operating margin on an adjusted basis contracted 190 bps in the first half of 2022, partly due to higher inflation resulting in increased raw material costs and supply chain disruption, also weighing on the margin growth. Our Stryker Operating Income Comparison dashboard has more details.

Looking at SYK stock, we believe there is more room for growth from its current market price of $226. The company’s management has guided for 6% to 8% revenue growth for the full-year 2022. At the mid-point of the guided range, it translates into revenue of $18.3 billion. We assume the current share count of 378.3 million (reported for Q2 2022) to arrive at the expected revenue per share of $48.40 for the full year 2022. Now, at its current levels, SYK stock is trading at 4.7x forward expected revenues, compared to the last three-year average of 5.5x, implying that it has more room for growth.

While SYK stock looks like it has more room for growth, it is helpful to see how Stryker’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Vicor vs. Stryker.

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