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St Jude Medical Inc. Stock Buy Recommendation Reiterated (STJ)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- St Jude Medical (NYSE: STJ) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income, notable return on equity, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Health Care Equipment & Supplies industry average. The net income increased by 5.2% when compared to the same quarter one year prior, going from $212.00 million to $223.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, ST JUDE MEDICAL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • ST JUDE MEDICAL INC has improved earnings per share by 16.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ST JUDE MEDICAL INC reported lower earnings of $2.40 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $2.40).
  • The gross profit margin for ST JUDE MEDICAL INC is currently very high, coming in at 78.30%. Regardless of STJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.66% trails the industry average.

St. Jude Medical, Inc. develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. It operates in two divisions, Cardiovascular and Ablation Technologies, and Implantable Electronic Systems. St Jude Medical has a market cap of $13.3 billion and is part of the health care sector and health services industry. The company has a P/E ratio of 19.00, above the S&P 500 P/E ratio of 18.00. Shares are up 26.5% year to date as of the close of trading on Wednesday.

You can view the full St Jude Medical Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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