Stryker Producing Excellent Results, But Expectations Are High

This year will be the 25th year I've followed med-tech (holy crap I'm old…), and Stryker (SYK) continues to amaze me. Apparently, Stryker never got the memo about "trees not growing to the sky" and the need to settle into a quieter middle age. In addition to pursuing growth-oriented M&A to augment existing businesses and address new markets, Stryker continues to do an excellent job of managing its long-held core businesses.

A business that performs as well as Stryker should command premium valuation, but how much of a premium? High single-digit FCF growth suggests an expected return of around 7% to 8%, and maybe that's not bad expected return/risk balance for a company like Stryker. Still, I believe the expectations are a little too high now, and I'd want a better expected return before buying in - even for one of the best-run companies out there.

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Stryker Producing Excellent Results, But Expectations Are High