Intrinsic value of Stryker - SYK

Previous Close

$147.41

  Intrinsic Value

$191.05

stock screener

  Rating & Target

buy

+30%

  Value-price divergence*

+249%

Previous close

$147.41

 
Intrinsic value

$191.05

 
Up/down potential

+30%

 
Rating

buy

 
Value-price divergence*

+249%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of SYK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 55.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.86
  18.40
  17.06
  15.85
  14.77
  13.79
  12.91
  12.12
  11.41
  10.77
  10.19
  9.67
  9.21
  8.78
  8.41
  8.07
  7.76
  7.48
  7.23
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
  5.63
Revenue, $m
  11,325
  13,409
  15,696
  18,185
  20,870
  23,749
  26,815
  30,066
  33,496
  37,103
  40,884
  44,839
  48,966
  53,268
  57,746
  62,403
  67,245
  72,277
  77,506
  82,940
  88,588
  94,461
  100,569
  106,925
  113,541
  120,431
  127,611
  135,097
  142,904
  151,052
  159,558
Variable operating expenses, $m
 
  10,329
  11,982
  13,781
  15,722
  17,803
  20,020
  22,370
  24,849
  27,457
  30,190
  32,413
  35,397
  38,506
  41,743
  45,110
  48,610
  52,247
  56,027
  59,955
  64,038
  68,284
  72,699
  77,293
  82,076
  87,057
  92,247
  97,658
  103,302
  109,192
  115,340
Fixed operating expenses, $m
 
  356
  365
  374
  383
  393
  402
  412
  423
  433
  444
  455
  467
  478
  490
  503
  515
  528
  541
  555
  569
  583
  597
  612
  628
  643
  659
  676
  693
  710
  728
Total operating expenses, $m
  9,159
  10,685
  12,347
  14,155
  16,105
  18,196
  20,422
  22,782
  25,272
  27,890
  30,634
  32,868
  35,864
  38,984
  42,233
  45,613
  49,125
  52,775
  56,568
  60,510
  64,607
  68,867
  73,296
  77,905
  82,704
  87,700
  92,906
  98,334
  103,995
  109,902
  116,068
Operating income, $m
  2,166
  2,725
  3,350
  4,030
  4,765
  5,553
  6,393
  7,284
  8,224
  9,213
  10,250
  11,971
  13,103
  14,283
  15,512
  16,791
  18,120
  19,502
  20,937
  22,430
  23,981
  25,595
  27,273
  29,019
  30,837
  32,731
  34,705
  36,763
  38,909
  41,150
  43,489
EBITDA, $m
  2,712
  3,641
  4,314
  5,047
  5,838
  6,686
  7,590
  8,549
  9,561
  10,626
  11,742
  12,910
  14,128
  15,399
  16,722
  18,098
  19,528
  21,015
  22,561
  24,167
  25,836
  27,573
  29,379
  31,258
  33,215
  35,253
  37,377
  39,592
  41,902
  44,313
  46,831
Interest expense (income), $m
  180
  234
  303
  378
  460
  549
  643
  744
  852
  965
  1,083
  1,208
  1,338
  1,474
  1,616
  1,763
  1,917
  2,076
  2,242
  2,414
  2,593
  2,779
  2,973
  3,174
  3,384
  3,602
  3,829
  4,065
  4,312
  4,569
  4,837
Earnings before tax, $m
  1,921
  2,491
  3,047
  3,652
  4,305
  5,005
  5,750
  6,539
  7,373
  8,249
  9,167
  10,763
  11,765
  12,809
  13,896
  15,027
  16,203
  17,425
  18,695
  20,016
  21,388
  22,815
  24,300
  25,845
  27,454
  29,129
  30,876
  32,698
  34,598
  36,581
  38,652
Tax expense, $m
  274
  672
  823
  986
  1,162
  1,351
  1,552
  1,766
  1,991
  2,227
  2,475
  2,906
  3,177
  3,458
  3,752
  4,057
  4,375
  4,705
  5,048
  5,404
  5,775
  6,160
  6,561
  6,978
  7,412
  7,865
  8,337
  8,828
  9,341
  9,877
  10,436
Net income, $m
  1,647
  1,818
  2,224
  2,666
  3,143
  3,653
  4,197
  4,774
  5,382
  6,022
  6,692
  7,857
  8,588
  9,351
  10,144
  10,970
  11,828
  12,720
  13,648
  14,611
  15,613
  16,655
  17,739
  18,867
  20,041
  21,265
  22,540
  23,869
  25,256
  26,704
  28,216

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,384
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,435
  20,194
  23,639
  27,387
  31,431
  35,766
  40,385
  45,280
  50,446
  55,878
  61,573
  67,528
  73,744
  80,223
  86,966
  93,980
  101,272
  108,851
  116,726
  124,910
  133,416
  142,260
  151,459
  161,031
  170,995
  181,372
  192,186
  203,459
  215,217
  227,487
  240,298
Adjusted assets (=assets-cash), $m
  17,051
  20,194
  23,639
  27,387
  31,431
  35,766
  40,385
  45,280
  50,446
  55,878
  61,573
  67,528
  73,744
  80,223
  86,966
  93,980
  101,272
  108,851
  116,726
  124,910
  133,416
  142,260
  151,459
  161,031
  170,995
  181,372
  192,186
  203,459
  215,217
  227,487
  240,298
Revenue / Adjusted assets
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
Average production assets, $m
  4,035
  4,774
  5,588
  6,474
  7,430
  8,455
  9,546
  10,703
  11,925
  13,209
  14,555
  15,963
  17,432
  18,963
  20,557
  22,215
  23,939
  25,731
  27,592
  29,527
  31,537
  33,628
  35,803
  38,065
  40,420
  42,874
  45,430
  48,094
  50,874
  53,774
  56,803
Working capital, $m
  4,713
  1,837
  2,150
  2,491
  2,859
  3,254
  3,674
  4,119
  4,589
  5,083
  5,601
  6,143
  6,708
  7,298
  7,911
  8,549
  9,213
  9,902
  10,618
  11,363
  12,137
  12,941
  13,778
  14,649
  15,555
  16,499
  17,483
  18,508
  19,578
  20,694
  21,859
Total debt, $m
  6,914
  8,650
  10,803
  13,146
  15,674
  18,383
  21,269
  24,329
  27,558
  30,953
  34,512
  38,234
  42,119
  46,168
  50,383
  54,767
  59,324
  64,061
  68,983
  74,097
  79,414
  84,942
  90,691
  96,673
  102,901
  109,387
  116,145
  123,191
  130,540
  138,209
  146,215
Total liabilities, $m
  10,885
  12,621
  14,774
  17,117
  19,645
  22,354
  25,240
  28,300
  31,529
  34,924
  38,483
  42,205
  46,090
  50,139
  54,354
  58,738
  63,295
  68,032
  72,954
  78,068
  83,385
  88,913
  94,662
  100,644
  106,872
  113,358
  120,116
  127,162
  134,511
  142,180
  150,186
Total equity, $m
  9,550
  7,573
  8,865
  10,270
  11,787
  13,412
  15,144
  16,980
  18,917
  20,954
  23,090
  25,323
  27,654
  30,083
  32,612
  35,243
  37,977
  40,819
  43,772
  46,841
  50,031
  53,348
  56,797
  60,387
  64,123
  68,015
  72,070
  76,297
  80,706
  85,308
  90,112
Total liabilities and equity, $m
  20,435
  20,194
  23,639
  27,387
  31,432
  35,766
  40,384
  45,280
  50,446
  55,878
  61,573
  67,528
  73,744
  80,222
  86,966
  93,981
  101,272
  108,851
  116,726
  124,909
  133,416
  142,261
  151,459
  161,031
  170,995
  181,373
  192,186
  203,459
  215,217
  227,488
  240,298
Debt-to-equity ratio
  0.724
  1.140
  1.220
  1.280
  1.330
  1.370
  1.400
  1.430
  1.460
  1.480
  1.490
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
  1.580
  1.590
  1.590
  1.600
  1.600
  1.600
  1.610
  1.610
  1.610
  1.620
  1.620
  1.620
Adjusted equity ratio
  0.362
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,647
  1,818
  2,224
  2,666
  3,143
  3,653
  4,197
  4,774
  5,382
  6,022
  6,692
  7,857
  8,588
  9,351
  10,144
  10,970
  11,828
  12,720
  13,648
  14,611
  15,613
  16,655
  17,739
  18,867
  20,041
  21,265
  22,540
  23,869
  25,256
  26,704
  28,216
Depreciation, amort., depletion, $m
  546
  916
  964
  1,016
  1,073
  1,133
  1,197
  1,265
  1,337
  1,413
  1,492
  939
  1,025
  1,115
  1,209
  1,307
  1,408
  1,514
  1,623
  1,737
  1,855
  1,978
  2,106
  2,239
  2,378
  2,522
  2,672
  2,829
  2,993
  3,163
  3,341
Funds from operations, $m
  1,429
  2,735
  3,189
  3,682
  4,215
  4,786
  5,394
  6,039
  6,719
  7,434
  8,184
  8,796
  9,614
  10,466
  11,354
  12,277
  13,236
  14,234
  15,271
  16,348
  17,468
  18,633
  19,845
  21,106
  22,419
  23,787
  25,212
  26,698
  28,249
  29,867
  31,557
Change in working capital, $m
  -383
  285
  313
  341
  368
  394
  420
  445
  470
  494
  518
  542
  565
  589
  613
  638
  663
  689
  716
  744
  774
  805
  837
  871
  906
  944
  984
  1,026
  1,070
  1,116
  1,165
Cash from operations, $m
  1,812
  2,449
  2,875
  3,341
  3,847
  4,392
  4,974
  5,594
  6,249
  6,940
  7,666
  8,254
  9,048
  9,877
  10,740
  11,639
  12,573
  13,545
  14,554
  15,604
  16,694
  17,829
  19,008
  20,235
  21,512
  22,842
  24,228
  25,673
  27,179
  28,751
  30,392
Maintenance CAPEX, $m
  0
  -237
  -281
  -329
  -381
  -437
  -497
  -562
  -630
  -701
  -777
  -856
  -939
  -1,025
  -1,115
  -1,209
  -1,307
  -1,408
  -1,514
  -1,623
  -1,737
  -1,855
  -1,978
  -2,106
  -2,239
  -2,378
  -2,522
  -2,672
  -2,829
  -2,993
  -3,163
New CAPEX, $m
  -490
  -739
  -814
  -886
  -956
  -1,025
  -1,092
  -1,157
  -1,221
  -1,284
  -1,346
  -1,408
  -1,469
  -1,531
  -1,594
  -1,658
  -1,724
  -1,791
  -1,862
  -1,935
  -2,011
  -2,091
  -2,174
  -2,263
  -2,355
  -2,453
  -2,556
  -2,665
  -2,779
  -2,900
  -3,028
Cash from investing activities, $m
  -4,191
  -976
  -1,095
  -1,215
  -1,337
  -1,462
  -1,589
  -1,719
  -1,851
  -1,985
  -2,123
  -2,264
  -2,408
  -2,556
  -2,709
  -2,867
  -3,031
  -3,199
  -3,376
  -3,558
  -3,748
  -3,946
  -4,152
  -4,369
  -4,594
  -4,831
  -5,078
  -5,337
  -5,608
  -5,893
  -6,191
Free cash flow, $m
  -2,379
  1,473
  1,780
  2,127
  2,510
  2,930
  3,385
  3,875
  4,398
  4,954
  5,542
  5,990
  6,640
  7,320
  8,031
  8,771
  9,543
  10,345
  11,179
  12,046
  12,947
  13,883
  14,855
  15,867
  16,918
  18,012
  19,150
  20,336
  21,571
  22,858
  24,201
Issuance/(repayment) of debt, $m
  2,912
  1,964
  2,153
  2,342
  2,528
  2,709
  2,886
  3,059
  3,229
  3,395
  3,559
  3,722
  3,885
  4,049
  4,215
  4,384
  4,557
  4,736
  4,922
  5,115
  5,317
  5,528
  5,749
  5,982
  6,228
  6,486
  6,758
  7,046
  7,349
  7,669
  8,006
Issuance/(repurchase) of shares, $m
  -13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,929
  1,964
  2,153
  2,342
  2,528
  2,709
  2,886
  3,059
  3,229
  3,395
  3,559
  3,722
  3,885
  4,049
  4,215
  4,384
  4,557
  4,736
  4,922
  5,115
  5,317
  5,528
  5,749
  5,982
  6,228
  6,486
  6,758
  7,046
  7,349
  7,669
  8,006
Total cash flow (excl. dividends), $m
  505
  3,437
  3,933
  4,469
  5,038
  5,640
  6,272
  6,935
  7,627
  8,350
  9,102
  9,712
  10,525
  11,369
  12,245
  13,155
  14,100
  15,081
  16,101
  17,161
  18,263
  19,410
  20,605
  21,849
  23,145
  24,498
  25,909
  27,381
  28,920
  30,527
  32,207
Retained Cash Flow (-), $m
  -1,039
  -1,179
  -1,292
  -1,405
  -1,517
  -1,626
  -1,732
  -1,836
  -1,937
  -2,037
  -2,136
  -2,233
  -2,331
  -2,429
  -2,529
  -2,630
  -2,734
  -2,842
  -2,953
  -3,069
  -3,190
  -3,317
  -3,450
  -3,589
  -3,737
  -3,892
  -4,055
  -4,227
  -4,409
  -4,601
  -4,804
Prev. year cash balance distribution, $m
 
  3,156
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,415
  2,641
  3,064
  3,522
  4,014
  4,540
  5,099
  5,690
  6,312
  6,966
  7,479
  8,194
  8,940
  9,717
  10,525
  11,366
  12,240
  13,148
  14,092
  15,073
  16,094
  17,155
  18,259
  19,409
  20,606
  21,854
  23,154
  24,510
  25,926
  27,403
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,191
  2,418
  2,666
  2,900
  3,111
  3,295
  3,445
  3,556
  3,626
  3,652
  3,552
  3,497
  3,399
  3,262
  3,090
  2,888
  2,663
  2,421
  2,170
  1,915
  1,665
  1,423
  1,197
  989
  802
  638
  497
  379
  283
  206
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Stryker Corporation, together with its subsidiaries, operates as a medical technology company. It operates through three segments: Orthopaedics; MedSurg; and Neurotechnology and Spine. The Orthopaedics segment offers implants for use in hip and knee joint replacements, and trauma and extremities surgeries. The MedSurg segment provides surgical equipment and surgical navigation systems, endoscopic and communications systems, patient handling, emergency medical equipment and intensive care disposable products, and reprocessed and remanufactured medical devices, as well as other medical devices for use in various medical specialties. The Neurotechnology and Spine segment offers neurosurgical and neurovascular devices that include products used for minimally invasive endovascular techniques; products for brain and open skull based surgical procedures; orthobiologic and biosurgery products, including synthetic bone grafts and vertebral augmentation products; and minimally invasive products for the treatment of acute ischemic and hemorrhagic stroke. This segment also provides spinal implant products, which consists of cervical, thoracolumbar, and interbody systems for use in spinal injury, deformity, and degenerative therapies. The company markets and sells its products to doctors, hospitals, and other healthcare facilities through company-owned sales subsidiaries and branches, as well as third-party dealers and distributors in approximately 100 countries. Stryker Corporation was founded in 1941 and is headquartered in Kalamazoo, Michigan.

FINANCIAL RATIOS  of  Stryker (SYK)

Valuation Ratios
P/E Ratio 33.6
Price to Sales 4.9
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 30.5
Price to Free Cash Flow 41.8
Growth Rates
Sales Growth Rate 13.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 81.5%
Cap. Spend. - 3 Yr. Gr. Rate 20.2%
Financial Strength
Quick Ratio 15
Current Ratio 0
LT Debt to Equity 70%
Total Debt to Equity 72.4%
Interest Coverage 12
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 7.3%
Return On Total Capital 11.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9%
Return On Equity 18.2%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 66.6%
Gross Margin - 3 Yr. Avg. 66.2%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 20.6%
Operating Margin 19.1%
Oper. Margin - 3 Yr. Avg. 16.9%
Pre-Tax Margin 17%
Pre-Tax Margin - 3 Yr. Avg. 15.5%
Net Profit Margin 14.5%
Net Profit Margin - 3 Yr. Avg. 11.4%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 34.5%

SYK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SYK stock intrinsic value calculation we used $11325 million for the last fiscal year's total revenue generated by Stryker. The default revenue input number comes from 2016 income statement of Stryker. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SYK stock valuation model: a) initial revenue growth rate of 18.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SYK is calculated based on our internal credit rating of Stryker, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Stryker.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SYK stock the variable cost ratio is equal to 77.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $347 million in the base year in the intrinsic value calculation for SYK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Stryker.

Corporate tax rate of 27% is the nominal tax rate for Stryker. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SYK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SYK are equal to 35.6%.

Life of production assets of 17 years is the average useful life of capital assets used in Stryker operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SYK is equal to 13.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $9550 million for Stryker - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 372.835 million for Stryker is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Stryker at the current share price and the inputted number of shares is $55.0 billion.

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COMPANY NEWS

▶ [$$] Medical robotics: code comfort   [Aug-17-17 02:05PM  Financial Times]
▶ ETFs with exposure to Stryker Corp. : August 15, 2017   [Aug-15-17 05:09PM  Capital Cube]
▶ What Analysts Recommend for Stryker after 2Q17 Results   [Aug-01-17 07:38AM  Market Realist]
▶ How Did Strykers Earnings Fare in 2Q17?   [Jul-31-17 10:43AM  Market Realist]
▶ Stryker beats Street 2Q forecasts   [Jul-27-17 05:00PM  Associated Press]
▶ Stryker reports second quarter 2017 results   [04:02PM  GlobeNewswire]
▶ Top Stock Reports for McDonald's, 3M & Stryker   [Jul-26-17 06:07PM  Zacks]
▶ ETFs with exposure to Stryker Corp. : July 25, 2017   [Jul-25-17 01:27PM  Capital Cube]
▶ How Long Will Stryker Stock Sustain Its Bullish Trend?   [Jul-24-17 07:36AM  Market Realist]
▶ Stryker Expands Its Interventional Spine Segment   [Jul-20-17 10:39AM  Market Realist]
▶ ETFs with exposure to Stryker Corp. : July 14, 2017   [Jul-14-17 05:01PM  Capital Cube]
▶ Stryker leading the June 14th IQ100   [01:08PM  CNBC Videos]
▶ Stryker Corp. Value Analysis (NYSE:SYK) : July 3, 2017   [Jul-03-17 04:54PM  Capital Cube]
▶ Inside Zimmer Biomets Latest Dividend Payment   [07:39AM  Market Realist]
▶ Stryker to host conference call on July 27, 2017   [Jun-22-17 01:01PM  GlobeNewswire]
▶ Company News for June 20, 2017   [Jun-20-17 10:19AM  Zacks]
▶ Is This the Buyout Novadaq Needs?   [10:20AM  24/7 Wall St.]
▶ Strykers MAKO Total Knee Implant: Robotics in Orthopedics   [Jun-16-17 05:35PM  Market Realist]
▶ ETFs with exposure to Stryker Corp. : June 6, 2017   [Jun-06-17 11:48AM  Capital Cube]
▶ Nine members of iQ100 hit all time highs   [Jun-01-17 03:14PM  CNBC Videos]
▶ Top 3 Healthcare Stocks for 2017   [06:05AM  Investopedia]
▶ Seven iQ 100 members hit all-time highs   [01:59PM  CNBC Videos]
▶ Analysts Expect Medtronics Revenue to Rise 4% in Fiscal 4Q17   [May-23-17 11:05AM  Market Realist]
▶ ETFs with exposure to Stryker Corp. : May 22, 2017   [May-22-17 02:13PM  Capital Cube]
▶ Whats Strykers Guidance for 2017?   [10:39AM  Market Realist]
▶ Stryker Reported Strong Earnings in 1Q17   [Apr-28-17 05:18PM  Market Realist]
▶ Stryker Sees Composite Rating Move Up To 98   [Apr-27-17 11:17AM  Investor's Business Daily]
▶ Chipotle, Wynn, Arconic Beat; Stryker, Illumina Guide Q2 Profit Low   [Apr-25-17 06:06PM  Investor's Business Daily]
▶ Stryker reports first quarter 2017 results   [04:02PM  GlobeNewswire]
▶ You Should Own J&J, Zimmer Biomet Ahead Of Earnings: RBC   [Apr-12-17 02:50PM  Barrons.com]
▶ Stryker Stock Trades Ex-Dividend Wednesday   [Mar-28-17 10:17AM  Investopedia]
▶ Stryker Stock Trades Ex-Dividend Wednesday   [10:17AM  at Investopedia]
▶ Stryker to host conference call on April 25, 2017   [Mar-27-17 01:02PM  GlobeNewswire]
▶ Stryker announces Annual Meeting of Shareholders   [Mar-20-17 01:16PM  GlobeNewswire]
Stock chart of SYK Financial statements of SYK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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