At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Time to buy Medtronic?
In just a little over a week, Medtronic (NYSE: MDT) is due to report fiscal Q1 earnings. Just a few hours ago, ace equities researcher Standpoint Research told investors to buy the medical equipment maker -- but not for the reason you think.

Upgrading Medtronic to "accumulate" this morning, Standpoint went out of its way to warn investors: "This call is not a forecast of good news ... but a bet that the market has already priced in bad news." In fact, if you're looking for a quick pop, or hoping to avoid a nasty drop after earnings, Standpoint offers this suggestions: "Risk averse investors may want to sit on the sideline until after this announcement is made."

If, on the other hand, you're investing for the long-term -- as we at The Fool Motley consider wise -- Standpoint believes Medtronic just might be the bargain you are looking for: "At 9X trailing twelve months earnings, 8X forward estimates, 50% off the all-time high from December 2000, trading at 1997 levels adjusted for inflation and down 25% since May 18 ... the odds are tipped in our favor for an upside move in the share price over the next 12-24 months." Yahoo! Finance puts Medtronic at 11 times trailing earnings, but to-may-to, to-mah-to -- even that number looks downright attractive relative to the 15 P/E multiple at Johnson & Johnson (NYSE: JNJ), and the 16-ish P/Es at Boston Scientific (NYSE: BSX) and St. Jude Medical (NYSE: STJ).

Standpoint further points out that while Medtronic's cardiac rhythm management division is struggling today, the firm gets about two-thirds of its revenues from other divisions. These include revenues from "emerging technologies." Also, 40% of the company's sales come from overseas customers -- these being two of Medtronic's key "revenue drivers."

Let's go to the tape
"Well and good," you say. But why should we care what Standpoint says anyway? Well, because Standpoint is a very good stockpicker. According to our supercomputer, Standpoint outperforms better than 96% of the investors we track on CAPS. It's literally one of the best analysts on Wall Street ... and according to Standpoint, Medtronic is one of the best bargains out there in Stock Land today, especially if you like dividends.

In a report issued last week, Standpoint revealed that "MDT ranked No. 17 out of 300 in our report on high-paying dividend names." Its dividend isn't the richest -- at 3.1%, Medtronic lags more generous 4%-plus-payers Intel (Nasdaq: INTC) or Lockheed Martin (NYSE: LMT), for example. But weighing in other factors, from debt load to profit margins to returns on equity, Standpoint sees Medtronic shares as more attractive than other companies paying dividends both larger, like Lockheed and Medtronic rival Johnson & Johnson, and slightly smaller, such as Wal-Mart (NYSE: WMT). (Albeit, all of these names make Standpoint's top 10% list of the most attractive dividend payers out of the 300 it surveyed.)

Foolish takeaway
So ... is it time to buy Medtronic? I have to admit, Fools, when I look at Medtronic today, it looks only fairly valued to me. Going for 11 times earnings, with a sub-8% long-term predicted growth rate, and 9% historical growth-rate? Even with the dividend, I don't see the shares as screamingly cheap.

On the other hand, Medtronic does generate strong free cash flow -- a bit ahead of reported GAAP earnings over the last 12 month period. That brings the valuation down a bit. And according to Standpoint, there are other reasons to feel optimistic:

  • "The shares ... are currently showing Relative Strength at just 11/100 ... this is usually [a relative strength] for names oversold on bad news."
  • "The company has a new and experienced CEO ..."
  • "and there remain significant opportunities in emerging markets."

All in all, Standpoint seems to believe Medtronic could surprise us -- if we give the company, and its new CEO, a little time to pull together a turnaround. Based on Standpoint's record, I'm willing to give Medtronic a chance. Are you? Tell us -- on Motley Fool CAPS.