Medtronic PLC (MDT)

Conclusion

Medtronic plc develops and sells device-based medical therapies across cardiovascular, neuroscience and medical-surgical portfolios. At a price of 102.79 USD on 2026-11-09, the market capitalisation is 131.48 billion USD.

The verdict is fair. The price-to-earnings ratio is 25.1x against a ten-year median of 29.1x, a premium of -13.5%, while the enterprise value to EBITDA of 14.8x compares with a median of 15.2x, a premium of -2.8%. The discounted cash flow value is 76.48 USD per share at a discount rate of 8.87%. The fair value band runs from 73.04 to 109.56 USD with a midpoint of 91.30 USD, a margin of safety of -11.2% at the current price. The reverse discounted cash flow implies growth of 7.4% a year, against five-year revenue growth of 3.8% and five-year free cash flow per share growth of 3.2%, so the price assumes faster growth than the company has delivered.

What holds the case up is cash generation and balance sheet strength: free cash flow conversion of 117.3% on a trailing twelve-month basis, eight earnings beats out of eight quarters, and an Altman Z-score of 3.18. What could break it is returns and growth. Return on invested capital of 8.3% sits only just above the weighted average cost of capital of 8.0%, the ten-year revenue growth rate is 2.4% a year, and the price-to-book ratio of 2.6x compares with a median of 2.3x.

Financial health

Financial strength is green, supported by a current ratio of 2.07, net debt to EBITDA of 1.90x, interest coverage of 10.1x and a debt to equity ratio of 0.56. The quick ratio is weaker at 0.77, which means the company relies on inventory and receivables to meet short-term obligations. The Altman Z-score is 3.18, in the safe zone; the Altman model was designed for manufacturers, and Medtronic is a manufacturer, so the reading applies directly. Insolvency risk is low, about 0.1% by the estimate of the Ohlson model over one to two years. Debt has fallen over the last five years, with a five-year change in debt against revenue growth of -2.7%. Overall, the balance sheet gives little reason for concern.

Earnings quality

Earnings quality is green. Free cash flow conversion is 117.3% on a trailing basis and 120.2% over five years, so reported profits are backed by cash. The accrual ratio is -2.7%, which points to conservative accounting. Stock-based compensation is 1.3% of revenue, and free cash flow after it is 5.64 billion USD. The share count fell at a compound rate of 1.0% over five years, which indicates buybacks. The Piotroski score is 7 out of 9. The Beneish M-score is not available. Medtronic beat earnings estimates in all eight recent quarters, by an average of 2.3%. Analyst estimates for the next year have edged down by 0.1% over 90 days, with four upward revisions and one downward revision in the last 30 days.

Profitability

Profitability is green. The gross margin is 66.7% against a ten-year median of 66.5%, the operating margin is 18.1% against 17.8%, and the net margin is 13.9% against 13.4%, so margins sit at or slightly above their own history. The operating margin stability reading is 11.2%. Return on invested capital is 8.3% against a weighted average cost of capital of 8.0%, a difference of 0.32% that is rated neutral, so the business earns only a thin margin over its cost of capital. The five-year median return on invested capital is 7.2%. Return on equity is 10.4%, and the DuPont split shows a net margin of 13.2%, an asset turnover of 0.39x and an equity multiplier of 1.88x. Leverage adds to the equity return, so the modest asset turnover is the weaker part of the picture.

Growth

Growth is yellow, because revenue and earnings growth are modest and the next year estimate is neutral. Revenue compounds at 5.2% over three years, 3.8% over five years and 2.4% over ten years. Earnings per share compound at 9.7% over three years, 6.9% over five years and 4.2% over ten years. Free cash flow per share compounds at 7.0% over three years, 3.2% over five years and 3.7% over ten years. Revenue grew in 8 of the 10 comparable years. The next year earnings growth estimate is 7.2%, which is above the five-year revenue growth but in line with the recent per-share trend. The longer record shows slower growth than the current price implies.

Valuation

Valuation is yellow, because the verdict is fair and the margin of safety is negative. The price-to-earnings ratio of 25.1x compares with a ten-year median of 29.1x, a premium of -13.5%. Enterprise value to EBITDA is 14.8x against 15.2x, a premium of -2.8%. Price to free cash flow is 21.4x against 21.7x, a premium of -1.3%. Price to sales is 3.5x against 3.9x, a premium of -9.6%, and price to book is 2.6x against 2.3x, a premium of 12.3%. The discounted cash flow value is 76.48 USD at a discount rate of 8.87%, with the terminal value making up 55.5% of it. The fair value from historical multiples is 106.13 USD. The fair value band is 73.04 to 109.56 USD, with a midpoint of 91.30 USD and a margin of safety of -11.2%. These figures are an order of magnitude built on fixed assumptions, not a price target. The dividend yield is 2.8%, and the dividend absorbs 59.5% of free cash flow.

Risks

The main risk is that returns stay close to the cost of capital. A return on invested capital of 8.3% against a weighted average cost of capital of 8.0% leaves little room for error, and any drop in margins would push returns below that cost. Slow long-run growth is a second risk: ten-year revenue growth of 2.4% a year is well below the 7.4% implied by the reverse discounted cash flow, so a continued slowdown would weaken the case. The discounted cash flow value depends on the terminal value for 55.5% of its total, so small changes in the long-term growth assumption of 2.5% would move it noticeably. The price-to-book premium of 12.3% means the market already pays more than the historical norm for each unit of book value. The quick ratio of 0.77 is the weakest balance sheet figure and depends on steady collection of receivables. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot test refinancing risk or the mix of growth across the three portfolios.