Evaluating Medtronic’s Fair Value After Positive Q4 Earnings Surprise in 2025

Thinking about what to do with your Medtronic shares? You are not alone. This stock has been making the rounds lately as investors weigh its steady gains against some market turbulence. Despite a dip of 2.6% over the last week, Medtronic is still up 2.0% in the past month and boasts a healthy 18.8% return year-to-date. Looking at a longer period, the 1-year return sits at 9.4%, while the 3-year gain stands at 25.9%. However, the 5-year return is just 1.1%, which might surprise those who expected smooth, upward momentum throughout.

The market’s mood about Medtronic seems to have shifted, with appetite for healthcare stocks in general picking up as investors become more comfortable with long-term risks. There has been recent chatter about policy changes and technological advances giving companies like Medtronic more room to grow. This may help explain some of the renewed confidence reflected in the stock price.

If you are wondering whether Medtronic is undervalued right now, there is a good reason to dig deeper. The company comes in with a valuation score of 4, meaning it passes 4 out of 6 value-focused checks for being undervalued. But what does that score really tell us, and what makes for the best approach to deciding if the stock is a bargain? Let’s walk through the main valuation methods next and stay tuned for a fresh perspective at the end that might just change the way you think about value.

Medtronic delivered 9.4% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.

Approach 1: Medtronic Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This method reflects what Medtronic’s upcoming cash generation could be worth in present terms, based on realistic growth assumptions.

Medtronic’s most recent Free Cash Flow comes in at $5.41 Billion. Analyst consensus points to steady growth, with projected Free Cash Flow rising to $6.94 Billion by 2028. Beyond 2028, the forecasts are extrapolated using conservative growth rates, which brings the ten-year outlook into sharper focus.

When all these future cash flows are summed and discounted, the DCF model calculates a fair value of $104.61 per share. This figure implies that Medtronic stock is currently trading at an 8.9% discount to its intrinsic value, suggesting the price is slightly below what the long-term fundamentals would justify.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Medtronic.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Medtronic's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Medtronic Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to valuation measure for profitable companies like Medtronic because it offers a simple way to compare a company’s share price to its current earnings. A reasonable PE ratio helps investors judge what kind of return they might expect for each dollar invested, while also factoring in growth prospects and the company’s risk profile.

Generally, companies with stronger growth prospects or lower risks can justify a higher PE ratio, while firms facing more uncertainty or slower growth should trade at lower multiples. Medtronic currently trades at a PE ratio of 26.2x. Compared to the broader Medical Equipment industry average of 29.2x and an average peer PE of 45.6x, Medtronic comes in below both. This suggests the market has more modest expectations for its near-term growth or risk profile.

An alternative perspective is provided by Simply Wall St's “Fair Ratio” metric, which is designed to move beyond simple peer or industry comparisons. The Fair Ratio, at 28.0x for Medtronic, represents what a balanced multiple should be when taking into account factors like the company’s expected earnings growth, profit margins, size, industry context, and unique risk characteristics. This approach is more holistic than traditional benchmarks and reflects a more tailored, data-driven estimate of Medtronic’s fair value multiple.

Looking at both numbers, Medtronic’s actual PE ratio of 26.2x is closely aligned with the proprietary Fair Ratio of 28.0x. This indicates that the stock’s price is about in line with its fundamentals right now.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Medtronic Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a way for you to create your own story about a company, connecting the bigger picture, such as Medtronic’s competitive strengths, innovations, or risks, to a financial forecast and finally to a fair value estimate. More than just plugging in numbers, Narratives let investors reflect their own beliefs and assumptions about a company’s future, such as estimated growth in revenue, profit margins, or the right valuation multiple.

Narratives are easy to use and accessible right on Simply Wall St’s Community page, where millions of investors build and share their perspectives. By framing decisions around a Narrative, you can quickly see whether your own fair value estimate is above or below the current share price, helping you decide when it is time to buy or sell. As new information from earnings reports or news is released, these Narratives update dynamically, ensuring your perspective remains relevant and actionable.

For example, one Medtronic Narrative currently reflects a bullish view with a fair value estimate of $112 per share, while another more cautious Narrative points to just $82. This range allows you to explore differing expectations on growth, margins, or risk, and choose or adjust the story and the numbers that best fit your outlook.

For Medtronic, we'll make it really easy for you with previews of two leading Medtronic Narratives:

🐂 Medtronic Bull Case

Fair Value: $99.90

Undervalued by: 4.56%

Revenue Growth Forecast: 5.39%

• Medtronic is positioned for accelerated growth and market share gains due to strong demand, digital health innovation, and an expanding product pipeline, especially in robotics and AI-enabled devices.
• Analysts forecast margin improvement and earnings growth, with operational restructuring and emerging market expansion contributing to long-term profitability.
• Key risks include ongoing margin pressures and challenges with underperforming segments or execution on new product launches. The consensus price target sits just above the current share price, suggesting Medtronic is fairly valued with modest upside.

🐻 Medtronic Bear Case

Fair Value: $95.00

Overvalued by: 0.36%

Revenue Growth Forecast: 5.15%

• Medtronic’s diversified product portfolio and strong R&D drive innovation in robotics and diabetes devices, supporting global growth and stable financials.
• While financial resilience and international presence are strengths, regulatory risks, intense competition, and diabetes segment challenges present headwinds.
• Shares trade at a premium to this narrative’s fair value estimate due to both execution risks and concerns about near-term upside as valuation aligns with larger diversified peers.

Do you think there's more to the story for Medtronic? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com