Medtronic faces challenges from drugs that are able to achieve the same results as the devices it manufactures. There is a possible risk that the devices may be replaced by medical interventions in the future. For Medtronic to remain relevant, it will have to increase demand by keeping a keen eye on demographic trends. Due to its size, it is well positioned to have greater stability, but this does not necessarily mean upside will always be great.
Baxter and Medtronic have delivered terrific returns in recent months. The former is up 41.2% from its 52-week low, and the latter is up 35% from its 52-week low. Medtronic is slightly cheaper at 15.2x past earnings but has fewer growth catalysts. While there are costs and benefits to both, I lean towards buying Baxter. You should also consider hedging through investing in St. Jude Medical, Inc. (NYSE:STJ), which only trades at around 10.5x forward earnigns and is forecast a growth rate of approximately 9.5% over the next five years. The stock is 16% less volatile than the broader market and thus offers a degree of safety alongside an investment in Baxter.
The article A Look at 2 Leading Medical Device Stocks originally appeared on Fool.com and is written by David Gould.
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