Stryker (SYK +0.37%) stock is hopping Tuesday morning, up 3.2% through 11:45 a.m. ET, after Raymond James analyst Jayson Bedford called the company "one of the highest quality stocks in large cap MedTech" -- and upgraded it.
Bedford predicts Stryker stock will hit $418 within a year, and has upgraded the stock to "outperform" (i.e., buy).
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Why RJ loves SYK
As Bedford explains, Stryker wrapped up its "fifth straight year of 10%-plus organic revenue growth in '25," yet "the stock underperformed last year as the NTM P/E multiple compressed by ~3 turns."
(Translation: The stock used to sell for more than 26 times forward earnings, but right now it's selling for closer to 23x earnings.)
Bedford thinks this reduction in the earnings multiple is unjustified, given Stryker's gains in market share, its "double-digit growth profile, and the likelihood for upside to estimates."
NYSE: SYK
Key Data Points
Is Stryker stock a buy?
I disagree.
Don't get me wrong -- Stryker's been doing a decent job of growing its profits, and most analysts anticipate its earnings will continue to grow 10% or better over the next five years. However, valued on GAAP profits, Stryker stock costs a hefty 46 times trailing earnings, and to me, that seems a more than generous price to pay for merely 10% earnings growth.
Indeed, 46 times earnings for 10% growth actually seems to me a bit excessive, and I number myself among the investors (with whom Bedford disagrees) who think that Stryker's earnings multiple should come down a bit.
Stryker stock is overpriced. Selling it is the right choice to make.
