Friday, February 8, 2019

Stryker Restores Its Growth Cred In A Big Way

Even though Stryker (SYK) had built an exceptional growth record, the shares had nevertheless underperformed going into the fourth quarter. I attribute that underperformance to worries about the company’s ability to maintain that impressive growth rate, with some investors choosing to view the supposed overtures toward Boston Scientific (BSX) as a sign of internal lack of confidence at Stryker, not to mention concerns about renewed vigor at rivals like Zimmer Biomet (ZBH). With strong fourth quarter results, and robust guidance for 2019, though, it seems like those concerns are at least momentarily moved to the back burner.

Stryker remains difficult to value, as I do believe the company’s high-quality growth deserves a premium, but arguably not that much of a premium. Healthcare tends to outperform later in the economic cycle and Stryker has a lot going on for it in 2019, but it’s tough for me to want to chase the shares around $180.

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Stryker Restores Its Growth Cred In A Big Way

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