This Stock May Be a Surprisingly Good Buy

I wrote in a previous article about how falling demand for Medtronic's (NYSE: MDT  ) heart devices in the U.S. squeezed the company's top line and led to a fall in earnings in the just-concluded quarter. However, CEO Omar Ishrak had pledged to accelerate the company's global growth and rev up its sales. Let's look at Medtronic's fundamentals and plans to see whether it might be a stock worthy of your investment dollars.

Problems and solutions
The sticking point for Medtronic in the last quarter was declining sales in the United States. Domestic sales account for a little more than half of total revenue, and the company had to contend with a fall in demand for its heart defibrillators and spinal products in U.S. markets as stiff hospital budgets and concerns over the safety of its implantable cardioverter defibrillator (ICD) device pushed down sales. However, the company has taken steps to arrest the sales decline through the introduction of a new ICD device known as Protecta.

As far as expansion outside the U.S. is concerned, the company is doing well to make its presence felt in emerging markets such as China and the Middle East, where revenues grew a significant 25%. The company appears confident about its prospects in the growing international markets. With Ishrak at the helm, we can expect Medtronic to push itself into new territories, as the former GE executive has a history of stepping up business, and he looks to do the same at Medtronic by expanding it internationally and bettering returns on research expenditures.

Money matters
As far as funding its expansion is concerned, the company has a healthy unlevered cash flow of $3.4 billion, up from $2.7 billion a year ago. This will stand the company in good stead as it pursues Ishrak's vision of expanding in global markets. Medtronic's debt-to-equity stands at 62%, and it sports an impressive interest-coverage ratio of 13, which means that the company wont find it difficult to service its interest payments in case it wishes to raise money through debt for its expansion.

What the pundits say
Let's look at how Medtronic's plans reflects analysts' estimates and how it stands up compared with its peers.

Company	Trailing P/E (TTM)	Forward P/E
Medtronic	11.8	9.2
Stryker (NYSE: SYK  )	15.0	12.0
Baxter (NYSE: BAX  )	14.8	11.6
St. Jude Medical (NYSE: STJ  )	14.3	11.1

Source: Yahoo! Finance. TTM = trailing 12 months.

Medtronic is the cheapest of the lot when stacked up on a price-to-earnings basis. It seems like the negative publicity by a medical journal about its Infuse device weighs heavily on investor sentiment, along with a fall in earnings on a sequential basis. However, analysts also seem to have taken into account the product innovation and geographical expansion moves when estimating next year's earnings. I can say that the stock is attractively priced when we consider the potential it holds.

When we throw in a dividend yield of 2.9%, the stock becomes even more attractive. Considering Medtronic's development moves and cheap valuation, the stock could turn out to be a good buy.

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