Stryker Corporation (SYK)

Conclusion

Stryker Corporation is a US medical technology company that sells surgical equipment, neurotechnology, orthopaedic implants and robotic systems to hospitals and surgeons in about 61 countries. At 325.73 USD on 2026-11-09, its market capitalisation is 124.0 billion USD.

The verdict is fair. The fair value band runs from 275.78 to 413.67 USD with a midpoint of 344.73 USD, giving a margin of safety of 5.8% at the current price. Today's P/E of 34.2 sits below its ten-year median of 42.8, and EV/EBITDA of 20.6 sits below 25.5. The DCF gives 281.79 USD per share, and the fair value from historical multiples is 407.66 USD. The price implies revenue and free cash flow growth of about 9.9% a year over the next period (reverse DCF). Revenue has grown at 11.8% a year over five years and free cash flow per share at 8.8%, so the price assumes growth close to the recent record.

What supports the case is the cash generation and the balance sheet. Free cash flow conversion is 126.2% on a trailing basis, the Altman Z-score is 4.89, and net debt to EBITDA is 1.84x. ROIC of 10.9% stands against a WACC of 8.3%. What would weaken it is the estimate trend: current-year estimates were cut by 1.19% over 90 days and next-year estimates by 2.68%, with no upward revisions in the last 30 days. Interest coverage of 6.66x is the weakest of the health measures, and a sustained fall in growth would close the gap to the price.

Financial health

Financial strength is green, held up by the Altman Z-score of 4.89 (safe zone), a net debt to EBITDA of 1.84x and a current ratio of 2.18. The quick ratio is 1.07 and debt to equity is 0.66. Interest coverage of 6.66x is rated neutral, the only weaker signal. The Altman model was designed for manufacturers, and Stryker is one, so its zone is a fair guide. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years. Debt, measured against five-year revenue growth, has fallen by 8.7% a year, so leverage has been reduced while revenue grew.

Earnings quality

Earnings quality is green. Free cash flow conversion is 126.2% on a trailing basis and 114.0% over five years, and the accrual ratio is -4.0%, which means cash earnings are above reported earnings. Stock-based compensation is 0.7% of revenue, and free cash flow after it is 4.38 billion USD. The share count has grown by 0.1% a year over five years, so there have been no net buybacks. The Piotroski score is 4 out of 9, which is neutral. The Beneish M-score is not available. Over the last eight quarters, earnings beat estimates six times and missed twice, with an average surprise of 0.7%.

Profitability

Profitability is green. The gross margin is 65.5% against a ten-year median of 63.1%, the operating margin is 21.3% against 21.6%, and the net margin is 13.8% against 13.1%. Margins are close to their history, and the operating margin's stability measure is 9.1%. ROIC is 10.9% against a WACC of 8.3%, and the ROIC minus WACC value of 2.6% is positive. The five-year median ROIC is 10.0%. ROE is 15.5%. The DuPont split shows a net margin of 12.9%, asset turnover of 0.53 and an equity multiplier of 2.13, so leverage contributes to the return but does not drive it.

Growth

Growth is green. Revenue compound growth is 10.8% over three years, 11.8% over five years and 9.7% over ten years. Earnings per share grew by 11.2% a year over three years, 15.1% over five years and 8.4% over ten years. Free cash flow per share grew by 28.1% a year over three years, 8.8% over five years and 21.1% over ten years. Revenue grew in nine of the last ten years. Next year's EPS growth estimate is 9.9%, which is the growth the market is currently expecting.

Valuation

Valuation is yellow. The current multiples sit below their ten-year medians: P/E 34.2 against 42.8 (a premium of -20.1%), EV/EBITDA 20.6 against 25.5 (-19.5%), P/FCF 27.1 against 38.9 (-30.3%), P/S 4.7 against 5.6 (-15.1%) and P/B 5.3 against 6.3 (-16.5%). The DCF gives 281.79 USD per share with a discount rate of 8.87%, and the terminal value makes up 58.9% of it. The fair value band is an estimate built on fixed assumptions, a 5% equity risk premium and capped growth, and not a price target. The reverse DCF implies growth of 9.9%, against revenue growth over five years of 11.8% and free cash flow per share growth of 8.8%. The dividend yield is 1.1% and the payout on free cash flow is 29.2%.

Risks

The weakest number is interest coverage of 6.66x. If earnings fell, the company would have less room to cover interest, although its debt is modest against EBITDA. The estimate cuts are the second risk: if analysts keep lowering forecasts, the growth the price assumes becomes harder to deliver. A fall in free cash flow would also reduce the DCF, which already depends heavily on the terminal value. The Beneish M-score is not available. The analysis has no debt maturity schedule and no revenue by segment, so it cannot test refinancing needs or show which product lines drive growth.