Medtronic is down nearly 30% from its April high as a weaker economy has hit the medical device sector. Medtronic is the leader in the space and is facing tough competitors who are taking share in some of its businesses.
Even after factoring in all of Medtronic's woes the stock trades at nine times forward estimates. Medtronic trades at a multiple that is lower than many pharmaceutical stocks who face patent cliffs and have much higher profit margins that the government might try and cut into. Medtronic's business is steadier and should trade at a higher multiple. As usual the analysts who loved the stock 30% higher now hate it as it has suffered a raft of downgrades.
I believe the secular trend is for higher healthcare consumption as the baby boomers age. There is a cyclical aspect to the business but only to a point as only so much of healthcare spending is discretionary. Medtronic does face competition but they always did. At nine times forward earnings there is a lot of room for error and a lot of upside potential if they meet their modest goals.