Medtronic, Zimmer or Stryker — who's stock is the best bet?
Here are 10 key observations on these three orthopedic device company giants from a Seeking Alpha report.
1. Healthcare reform is expected to benefit all three companies because more people will have insurance, especially those in lower income tax brackets. One year after implementing the insurance mandate and health insurance exchanges, all three companies show growth. From Jan. 1, 2013 to Dec. 26, 2014, the companies grew:
• Stryker — 71 percent
• Zimmer — 69 percent
• Medtronic — 75 percent
2. The medical appliances and equipment industry is expected to grow as a whole, according to the report. Overall earnings growth is around six times the S&P's average earnings growth rate, but this is expected to slow next year to just 1.04 times.
3. Through the first half of next year, the three companies are expected to under-grow earnings relative to S&P's average — except Stryker, which barely market performs currently. This trend is expected to continue through the next five years.
4. Stryker delivered the biggest year-over-year revenue growth in the most recent quarter and Zimmer had the biggest earnings growth.
5. Zimmer has the widest profit and operating margins; Stryker has the narrowest.
6. Zimmer's management team reports the best returns on assets while Medtronic has the best returns on equity. Zimmer also has the biggest diluted earnings per share gain as a percentage of its current share price, according to the report.
7. Medtronic has the cheapest stock, relative to forward earnings. Zimmer has the cheapest stock relative to book value and the five-year PEG.
8. Stryker's stock is most overvalued when considering the earnings and company book. However, Stryker has the highest percentage of earnings over the current stock price for the quarter currently.
9. Stryker could also have the biggest growth through 2015. The report pegs Zimmer as having the largest growth offering over the next five years.
10. Analysts say Stryker stock offers the least upside potential over the next 12 months with the biggest downside risk. Medtronic has the least downside risk while Zimmer has the greatest upside.
11. Medtronic is best recommended, followed by Stryker and then Zimmer with "buy" ratings.
12. After comparing all categories, the report names Zimmer the winner with Medtronic second and Stryker a "distant third."