TS2B: Tech Stocks 2 Buy, Mega-Caps with Medtronic

Good Monday everyone and welcome to the BCB Cyber Series that takes on the tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions.

This week we revisit one of the most exciting medical technology companies that have become among the best in the business and their market cap proves it! Remember, whenever we do a revisit, our new material is posted on top of the previous in red so we can pick out the newest with ease all the while keeping the newbies up to date on a full, developing analysis. Now on with the show and the best name in Medical Technology we know: Medtronic.

Top Tech Stocks to Buy in Tech: Medtronic

Today, we are returning to Mega-Cap Tech Stocks, and this month that once again means the world’s largest medical device maker: Medtronic.

Before we get there though, as always, our reminder: with BCB Cyber we dig for the cyber-fuel we need, we are always working to make sure the best of the best, those monster companies in Tech, form a key portion of our portfolios.

For all these mega-cap stocks, just like Investopedia, our core defining feature is that the market cap is over $200 Billion! As always though, we dig deeper still, looking for those companies that are pushed by incredible disruptive tech with a great story, not to mention having a solid base in the numbers.

Before we dive too deep though, we strongly advocate that we don’t act solely on anyone else’s opinion, not even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!

Jumping right in now the BCB Cyber way, we cover 3 quick pieces of important information so we can get moving on our day. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our position on the stock.

This is TS2B, Tech Stock to Buy, Mega-Cap edition, and this week we are going to take on Medtronic, the Dublin, Ireland, device-based medical therapy maker.

BCB Cyber: Mega-Cap Analysis for 03.22.21

1 – STORY

Medtronic

Medtronic is simply one of the most well run, diversified, and healthy company’s we’ve seen. Particularly at the level of a Mega-Cap in Health and Biotechnology! Not only is Medtronic diversified into four aspects of quality health businesses (Cardiac/Vascular, Minimally Invasive Therapies, Restorative Therapies, and Diabetes), the company is also diversified across markets seeking to building a strong base across all humanity.

When we posted the above graphic in January, we expected the proportionality of revenue across the companies several divisions to continue unchecked and in a quick glance it has done exactly that (see below).

However, where this company truly excels is in its push to bring forth truly disruptive, yet profoundly helpful technologies. With a large, well qualified and respected emergent product line, the sky is the limit for Medtronic.

Medtronic company info (image gallery above) from JP Morgan Healthcare Conference Presentation January 2021 blended with BCB Cyber Fuel for a whole new experience!

As if being best in class and built on a terrific pipeline that is “the strongest in the companies history” weren’t enough. Medtronic has also broken through and could be considered the top-notch exemplar for all ESG world investors to look for!

From January, we spoke a about the new technology being acquired and employed by Medtronic, and as a follow up we wanted to see the impact of those elements in coordination with revenue. As the following graphic illustrates, we’ve seen sequential growth over previous quarters to match however, the pandemic still had a significant impact in December and January of 2020/2021 respectively. However, new acquisitions are paying off with a stipulated total value consideration of $1.7 Billion.

We see this understanding expanded when Medtronic speaks of the NeuroMod & Specialty Therapies that have advanced to market. Delays due to pandemic drive occurred in sales but there is a great opportunity for future growth.

Best of all, since our last visit, Medtronic did post a surprise profit and the CEO of Medtronic went on CNBC with Jim Cramer to discuss the company’s return to normalcy while the pandemic begins to wain, posting a surprise beat in earnings per share (EPS) and that special pipeline we’ve been touting.

However, we would be remiss not to point out that Medtronic has seen some other difficulties in this tumultuous time. A recall was announced in the last month of “HVAD pump implant kits from the U.S. after receiving complaints that some devices have failed to start or restart promptly. Two deaths have been linked to the fault. Other kits have only restarted after a delay.”

Definitely cause for concern, no doubt, and our hearts go out to those families affected. While Medtronic works to correct the issues, there is hope as Medtronic has spent decades specializing in heart implant kits that have also saved countless lives and will find a ready fix to continue those efforts.

2 – BY THE NUMBERS

BCB Cyber turns now to follow five specific metrics: Revenue Growth, Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.

Starting out, Medtronic continues to be a bit of rule breaker for BCB Cyber as the market cap is slightly under the $200 Billion Mark.

Perhaps more importantly, Medtronic has a forward P/E that is starting to rebalance to where it was before the global health crisis began, as are Price/Book an Price/Sales ratios. This continues to be true as the stock of Medtronic continues to sit in the low 20s for a Forward P/E. The market picture for such large, impactful companies has definitely become more clear and despite the chaos in the world does appear to be settling in.

Medtronic’s revenue numbers continue to be strong despite the global headwinds of the past year. The company has consistently produced numbers in the 28 – 32 Billion Dollar range (above).

This continues to be reflected in the quarterly revenues announced since our last post as well seen in the chart below.

Now we turn to the effectiveness of management and profitability matrices highlighted by Operating Margin and Return on Assets.

While these numbers have remained strong they have come down some highlighting the continued impact of the pandemic.

Now we turn to the balance sheet. Medtronic in January demonstrated a quality cash position and a strong Operating Cash Flow (ttm) of $6Billion, we do see that total debt (ttm) has doubled the current cash position and does require a watchful eye to ascertain whether or not this will continue to be manageable.

The trends have continued as the world health crisis has continued to have an impact but as the interview above with Jim Cramer suggests, it was not near so bad as feared by many analysts.

To highlight the cash picture, Medtronic released the following describing their current free cash flow:

Most importantly here, while the company has taken a hit in Free Cash Flow, despite a global pandemic that had to repurpose their main source of business, they are still producing significant FCF and maintaining their level of investment in the future.

3 – THE BCB CYBER TAKE

As of this morning, on 03.22.21, my own portfolio has increased to a position of 8.33% from 3.48% in Medtronic with a cost basis (average cost) of $108.56.

The analysts at Simply Wall Street appear to see the same impact we have discussed above yet, much as we do, keep the future prospects in check. However, with many of the newly developed and acquired products just now coming on line and many procedures having been delayed by the pandemic, we see a brighter future than most and believe it was reflected in that last quarter.

We at BCB Cyber definitely believe this is a mega-cap worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire! In fact, we’d be willing to say that despite the rough going as of late, its one of the best disruptive tech plays in all of BioTech, definitely a best in class kinda company.

In January, analysts definitely seemed to agree as Morgan Stanley gave Medtronic an upgrade and many others are recommending a buy, particularly given the fact that the stock price does seem to sit in value territory (see below)!

A quick glance and we see the picture from January remains unchanged in March 2021.

Plus, in terms of opportunity, we may be seeing a special chart pattern emerge. Just to close with an optimistic outlook, we are particularly interested in the strong ascending triangle that has appeared in the Medtronic stock chart. Worth a look!

Remember, we are just like the masses, struggling to make ends meet and build our future. So, we start building and keep doing our homework. This is just what we need to start us on our journey toward cyberizing our lives.

BCB Cyber believes in the potential for this risky, tech innovator and loves the story. However, this is definitely a stock worth buying at the right price (we previously said $115/share, but would now move to $120/share given this analysis). We are still on board!

Remember we at BCB Cyber balance our perspective and cyberize our wealth over a longer term of 5 years or more. We will definitely be looking to add balance to our position, with the right portfolio proportions of between 4 to 5 percent and at the right price over the long term. Medtronic, definitely puts the “Tech into med-tech!”

Remember, as always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline on BCB Cyber.com!