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MDT Stock Study (6-1-26)

Posted by on June 25, 2026 at 06:59 | Last modified: June 1, 2026 08:37

I recently did a stock study on Medtronic PLC (MDT, $73.81). The previous stock study is here.

M* writes:

     > One of the largest medical-device companies, Medtronic develops
     > and manufactures therapeutic medical devices for chronic
     > diseases. Its portfolio includes pacemakers, defibrillators,
     > transcatheter heart valves, stents, spinal fixation devices,
     > neurovascular products, advanced energy, ablation laser therapy,
     > and surgical tools. The company primarily markets its products
     > to healthcare institutions and physicians in the United States,
     > Western Europe, and Japan. Foreign sales account for roughly
     > 50% of the company’s total sales.

Over the past 10 years, the large-size company has grown sales and earnings 1.4% and 2.5% per year, respectively [FY ends Apr 30; years on BI website and Value Line (VL) incremented by one to compensate]. Although parallel, lines are more flat and cyclical than up and straight with sales dips in ’19 and ’22 and EPS declines in ’17, ’20, ’22, and ’23. Five- (10-) year R^2 is 0.09 (0.19) but VL gives an Earnings Predictability score of 80. Shares outstanding decrease 9.5% (1.1%/year).

This is not a high-quality growth stock and I believe it fails visual inspection. While BetterInvesting® tells us to stop and move on, I like the [albeit] minimal growth prospects and a stock price that’s been stagnant for long enough to result in P/E compression. At the right price, I may be interested but only for a smaller position size rather than a core holding.

Over the past 10 years, PTPM leads peer averages but trails the industry while ranging from 12.9% in ’20 to 18.9% in ’17 with a last-5-year mean of 15.8%. ROE trails peer and industry averages while ranging from 6.1% in ’17 to 9.5% in ’21 with a last-5-year mean of 8.0% (shareholder equity consistently positive but declining 0.5% per year). Debt-to-Capital is less than peer and industry averages while ranging from 31.5% in ’21 to 39.9% in ’16 with a last-5-year mean of 33.6%.

Quick ratio is 1.6 and interest coverage 8.8 per M* who assigns “Narrow” Economic Moat, gives “Standard” rating for Capital Allocation and an A grade for Financial Health (per BetterInvesting® website). VL gives an A+ grade for Financial Strength.

With regard to sales growth:

My 3.0% per year forecast is below the range.

With regard to EPS growth:

My 4.0% forecast is below the long-term-estimate range (mean of eight: 7.2%). Initial value is 2026 Q3 EPS of $3.59/share (TTM) rather than ’25 EPS of $3.61.

My Forecast High P/E is 29.0. Over the past decade, high P/E ranges from 26.7 in ’25 to 49.7 in ’20 with last-5-year mean of 36.8 and a last-5-year-mean average P/E of 31.6. I am near bottom of the range (only ’25 is less).

My Forecast Low P/E is 16.0. Over the past decade, low P/E ranges from 20.4 in ’19 to 33.7 in ’17 with a last-5-year mean of 26.4. I am forecasting well below the range.

My Low Stock Price Forecast (LSPF) of $57.40 is default based on initial value from above: 22.2% less than previous close and 22.1% below the 52-week low.

Over the past decade, Payout Ratio (PR) increases from 61.3% in ’16 to 77.6% in ’25 with a last-5-year mean of 85.8%. While high, it has 48 consecutive years of dividend increases. I am forecasting conservatively below the range at 58.0%.

These inputs land MDT in the BUY zone with a U/D ratio of 3.2. Total Annualized Return (TAR) is 13.4%.

PAR (using Forecast Average—not High—P/E) of 8.5% is less than I seek for a large-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 76 studies done in the past 90 days (23 outliers including mine excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.0%, 6.5%, 31.6, 24.2, and 82.4%, respectively. I am lower across the board. VL projects a future average P/E of 18.0 that is less than MS (27.9) and less than mine (22.5).

MS high / low EPS are $4.92 / $3.51 versus my $4.37 / $3.59 (per share). My high EPS is less due to a lower growth rate. VL (M*) high EPS of $8.30 ($7.43) is greater than both.

MS LSPF of $70.80 implies a Forecast Low P/E of 20.2: less than the above-stated 24.2. MS LSPF is 16.7% less than the default $3.51/share * 24.2 = $84.94 resulting in more conservative zoning. MS LSPF is 20.0% greater than mine, however.

MOS is robust in the study because my inputs are near or less than historical/analyst/MS averages/ranges. MS TAR exceeding mine by 2.8% supports the assessment along with my substantially lower LSPF.

With regard to valuation, PEG is 1.8 and 4.9 per Zacks and my projected P/E: overvalued (M* has 1.9). Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.70. “Quick and Dirty” DCF method has stock undervalued by 12% while M* (CFRA) reports the stock at a 34% discount (10% premium).

As a low-quality growth stock that fails visual inspection, investment as a core holding is precluded. I’m also disappointed with the long-term [gradual] decline in shareholder equity. Nevertheless, it gets high marks for financial strength, is currently rated five stars by M*, and is a Dividend Aristocrat (an elite moniker) with a healthy dividend yield.

Per U/D, MDT is a BUY right now under $74/share. [126.7 / ((12.87 / 100 ) +1 ) ^ 5] ~ $69 meets the BetterInvesting® TAR criterion given a forecast high price ~$127.

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