DCF Studio

    SYK · NYQ · Healthcare

    Stryker Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 200.06

    Market price

    USD 275.12

    Implied upside

    -27.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 200.06-27.3%
    Exit multiple
    USD 361.26+31.3%
    Market price
    USD 275.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn7bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 27.8bnUSD 30.9bnUSD 34.2bnUSD 37.9bnUSD 42.0bn+10.8%
    EBITUSD 5.3bnUSD 5.9bnUSD 6.6bnUSD 7.3bnUSD 8.1bn+10.8%
    NOPATUSD 4.6bnUSD 5.1bnUSD 5.6bnUSD 6.3bnUSD 6.9bn+10.8%
    Add depreciation & amortisationUSD 1.4bnUSD 1.5bnUSD 1.7bnUSD 1.9bnUSD 2.1bn+10.8%
    Less capital expenditureUSD -860.4mUSD -953.6mUSD -1.1bnUSD -1.2bnUSD -1.3bn+10.8%
    Less increase in working capitalUSD -686.4mUSD -760.7mUSD -843.1mUSD -934.4mUSD -1.0bn+10.8%
    Free cashflow to firmUSD 4.4bnUSD 4.9bnUSD 5.4bnUSD 6.0bnUSD 6.7bn+10.8%
    Discount factor0.95810.87940.80720.74090.6801-
    Present valueUSD 4.2bnUSD 4.3bnUSD 4.4bnUSD 4.5bnUSD 4.5bn+1.7%
    Present Value Of The ForecastUSD 21.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.845Reported 0.768, pulled toward 1.0 (Blume)
    Cost of equity9.64%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 105.5bn86.9% of capital
    Total debtUSD 15.9bn13.1% of capital, book value as a proxy
    Tax rate14.1%Effective, capped at statutory
    WACC8.94%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 200.06

    75% of EV

    Forecast FCFF, final year
    USD 6.7bn
    Capex at depreciation, working capital in reinvestment
    USD 8.0bn
    Less reinvestment at g/ROIC (22.7% of NOPAT)
    USD -1.8bn
    Capitalised
    USD 6.2bn
    ROIC (reported)
    11.0%
    Terminal value, undiscounted
    USD 98.7bn
    Terminal value, discounted
    USD 67.1bn
    Enterprise value
    USD 89.1bn
    Less net debt
    USD 11.8bn
    Equity value
    USD 77.3bn

    Exit at 18.8x EBITDA

    Value per shareUSD 361.26

    86% of EV

    Terminal value, undiscounted
    USD 190.3bn
    Terminal value, discounted
    USD 129.4bn
    Enterprise value
    USD 151.4bn
    Less net debt
    USD 11.8bn
    Equity value
    USD 139.6bn

    Spread between methods: 57%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.94%276.40288.37302.88320.89343.93
    7.94%228.05234.51242.03250.93261.68
    8.94%192.75196.19200.06204.48209.60
    9.94%165.84167.53169.38171.40173.63
    10.94%144.66145.31145.96146.62147.29

    Outlined: this model. Green text: above today's price of 275.12. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year10.8%18.4%+7.6pp
    EBIT margin19.2%26.1%+6.9pp
    Discount rate8.9%7.4%-1.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.