Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?
One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Medtronic, Inc. (NYSE:MDT) fits the bill.
The quest for perfection Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:
With those factors in mind, let's take a closer look at Medtronic, Inc. (NYSE:MDT).
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-year annual revenue growth > 15%||5.3%||Fail|
|1-year revenue growth > 12%||2%||Fail|
|Margins||Gross margin > 35%||75.7%||Pass|
|Net margin > 15%||21.1%||Pass|
|Balance sheet||Debt to equity < 50%||67.2%||Fail|
|Current ratio > 1.3||1.43||Pass|
|Opportunities||Return on equity > 15%||19.1%||Pass|
|Valuation||Normalized P/E < 20||17.20||Pass|
|Dividends||Current yield > 2%||2.3%||Pass|
|5-year dividend growth > 10%||16.4%||Pass|
|Total score||7 out of 10|
Since we looked at Medtronic last year, the company hung onto its seven-point score for the third year in a row. The stock has also been quite consistent, posting gains of around 15% over the past year.
Medtronic is a giant in the medical-devices industry, with particular specialties in cardiac and cardiovascular devices like pacemakers, valves, and stents. With an aging population, that has been a high-growth industry, even as headwinds like the new excise tax on medical-device sales weighing on Medtronic's future prospects.
One area where Medtronic has focused its efforts is in China. With its September purchase of China Kanghui Holdings, Medtronic, Inc. (NYSE:MDT) boosted its presence in the orthopedic implant market, fighting back against both Johnson & Johnson (NYSE:JNJ) and Zimmer Holdings (NYSE:ZMH) . J&J has been able to boost its international medical device business despite adverse currency impacts, with the Asia-Pacific region providing much of the gains, while Zimmer made its own Chinese acquisition in 2010 and now relies on Asia for nearly a fifth of its total revenue.