St. Jude Medical, Inc. – Value Analysis (NYSE:STJ) : December 7, 2016

Capitalcube gives St. Jude Medical, Inc. a score of 47.

Our analysis is based on comparing St. Jude Medical, Inc. with the following peers – Boston Scientific Corporation, Medtronic plc, Edwards Lifesciences Corporation, Waters Corporation, Stryker Corporation, C. R. Bard, Inc., Zimmer Biomet Holdings, Inc., Stereotaxis, Inc., Baxter International Inc. and Integer Holdings Corporation (BSX-US, MDT-US, EW-US, WAT-US, SYK-US, BCR-US, ZBH-US, STXS-US, BAX-US and ITGR-US).

Investment Outlook

St. Jude Medical, Inc. has a fundamental score of 47 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • St. Jude Medical, Inc.’s current Price/Book of 5.07 is about median in its peer group.
  • The market expects STJ-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • STJ-US has relatively low profit margins and median asset efficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • STJ-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While STJ-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • STJ-US has additional debt capacity.

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Leverage & Liquidity

STJ-US has additional debt capacity.

  • With debt at a reasonable 20.51% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 14.46%), and a well-cushioned interest coverage level of 6.60x, STJ-US has the capacity to borrow some more.
  • Of the 10 chosen peers for the company, only 9 of the stocks have an outstanding debt balance. Companies with no debt include STXS-US.

STJ-US has maintained its relatively high liquidity profile from the recent year-end.

  • STJ-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 20x in 2012.
  • While its interest coverage decreased to 6.60x from 10.58x (in 2015), its peer median increased during this period to 6.60x from 4.47x.
  • Interest coverage fell 6.11 points relative to peers.
  • STJ-US‘s debt-EV has declined 7.01 percentage points from last year’s high and is now below its five-year average debt-EV of 22.08.
  • The decrease in its debt-EV to 20.51% from 27.52% (in 2015) was also accompanied by a decrease in its peer median during this period to 14.46% from 24.15%.
  • Relative to peers, debt-EV rose 2.68 percentage points.

Access the detailed analysis for St. Jude Medical, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Boston Scientific Corporation 14.43 1.05 4.9 6.44
Medtronic plc 24.15 2.35 4.56 22.64
Edwards Lifesciences Corporation 2.39 4.08 54.73 91.25
Waters Corporation 15.05 6.8 14.35 36.41
Stryker Corporation 14.46 2.43 21.69 34.28
C. R. Bard, Inc. 9.66 2.63 17.97 60.23
Zimmer Biomet Holdings, Inc. 31.2 2.03 3.35 15.76
Stereotaxis, Inc. 0 0.48 -1.72 -56.42
Baxter International Inc. 10.87 2.53 8.03 61.72
Integer Holdings Corporation 73.7 2.63 1.58 4.89
St. Jude Medical, Inc. 20.51 1.93 6.6 20.43
Peer Median 14.46 2.43 6.6 22.64
Best In Class 2.39 6.8 54.73 91.25

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Company Profile

St. Jude Medical, Inc. develops, manufactures and distributes cardiovascular medical devices for the global cardiac rhythm management, cardiovascular and atrial fibrillation therapy areas and neurostimulation medical devices for the management of chronic pain. The company was founded by Manuel A. Villafana in 1976 and is headquartered in St. Paul, MN.


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