Medtronic is the world’s largest manufacturer of implantable biomedical devices, with sales to over 120 countries. Medtronic is actually an American-Irish registered medical device company that primarily operates in the United States. Medtronic has an operational and executive headquarters in Fridley, Minnesota in the US. This week, I fundamentally analyze Medtronic’s stock. I review MDT’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Medtronic’s 2020 free cash flow of $6,021 million figure, a 7% growth rate of FCF (growth for the next 10 years), 10% discount rate, 5% long term growth rate (growth from 10 year mark to perpetuity), 1,352 million shares outstanding, and $21,976 million of long term debt, the DCF analysis yields us an intrinsic value of $91 per share. If we drop the discount rate from 10% to 8.6%, the intrinsic value comes to $135 per share. Using the current stock price of about $124 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 4.4% if we hold this security through 2060.
0:33 Business Overview
4:14 Key Ratios Analysis
14:28 Discounted Cash Flow Analysis / Intrinsic Value
16:59 Expected Rate of Return Calculation
18:08 Summary / Conclusion
Medtronic’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Medtronic plc is an American-Irish registered medical device company that primarily operates in the United States. Medtronic has an operational and executive headquarters in Fridley, Minnesota in the US.
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