Medtronic plc (NYSE:MDT) saw its share price hover around a small range of US$122 to US$132 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Medtronic’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Medtronic still cheap?
According to my valuation model, Medtronic seems to be fairly priced at around 15.18% above my intrinsic value, which means if you buy Medtronic today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $111.60, there’s only an insignificant downside when the price falls to its real value. In addition to this, Medtronic has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Medtronic?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Medtronic's earnings over the next few years are expected to increase by 99%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MDT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on MDT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Medtronic, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Medtronic and you'll want to know about it.
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