Is It Too Late To Consider Medtronic (MDT) After Recent Share Price Gains?

• If you are wondering whether Medtronic at around US$101.84 is still a solid deal or starting to look fully priced, this article is here to help you weigh up what you are actually paying for.
• Over the last year the stock has a 14.6% return, with gains of 1.0% over 7 days, 4.6% over 30 days and 6.0% year to date. These figures raise fair questions about how much future potential or risk is already reflected in the price.
• Recent news around Medtronic has centered on its position as a large, diversified medical device company and ongoing attention from investors looking at established healthcare names as potential core holdings. That broader interest helps explain why some investors are reassessing what counts as a reasonable entry price for the shares.
• Simply Wall St currently gives Medtronic a valuation score of 4 out of 6. We will unpack this using several common pricing methods before finishing with a more complete way to think about what the stock might be worth to you.

Medtronic delivered 14.6% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.

Approach 1: Medtronic Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model looks at the cash Medtronic is expected to generate in the future and then discounts those cash flows back to today to estimate what the business might be worth now.

For Medtronic, the model used is a 2 Stage Free Cash Flow to Equity approach, built on current last twelve months free cash flow of about $5.33b. Analyst inputs and Simply Wall St extrapolations project free cash flow rising to $10.11b in 2035, with interim years such as 2026 and 2028 modeled at $5.83b and $7.25b respectively. Each of these projected figures is discounted back to today using the model’s required return assumptions.

Pulling those discounted cash flows together, the DCF output suggests an intrinsic value of about $105.88 per share. Against a market price around $101.84, the model implies roughly a 3.8% discount, which sits well within a typical margin of error for this kind of analysis.

Result: ABOUT RIGHT

Medtronic is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Medtronic.

Approach 2: Medtronic Price vs Earnings

For profitable companies like Medtronic, the P/E ratio is a useful way to think about price because it links what you pay for each share to the earnings that support that price. Investors usually expect higher P/E ratios when they see stronger earnings growth and lower perceived risk, while slower growth or higher risk tends to justify a lower, more cautious P/E level.

Medtronic currently trades on a P/E of about 27.41x. That sits below the Medical Equipment industry average of roughly 30.64x and well below the peer group average of about 42.74x. Simply Wall St also calculates a Fair Ratio for Medtronic of 35.73x. This Fair Ratio is a proprietary estimate of what P/E might make sense given factors such as earnings growth, profitability, industry, market cap and risk profile.

Compared with simple peer or industry comparisons, the Fair Ratio is more tailored because it folds in those company specific drivers rather than assuming all firms deserve similar multiples. With Medtronic’s actual P/E of 27.41x sitting below the Fair Ratio of 35.73x, the shares screen as undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Medtronic Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives.

A Narrative is simply your story about a company, linked directly to the numbers you care about, such as your view of fair value and what you expect for future revenue, earnings and margins.

On Simply Wall St, Narratives sit in the Community page and turn that story into a clear forecast and fair value. They then line it up against today’s share price so you can quickly see whether your view suggests buy, hold or sell territory for you.

Because Narratives refresh when new information like news or earnings is added, your Medtronic view can shift in real time. For example, one investor might see Medtronic as worth well above the current US$101.84 share price, while another might set fair value closer to or below that level based on a more cautious outlook for the business.

Do you think there's more to the story for Medtronic? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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