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Covidien Looks Fully Valued

NEW YORK (TheStreet) -- With shares of Covidien (COV) now resting near their 52-week high, it would seem this company is back in the Street's good graces. For a while, analysts did nothing but complain about potential adversities following the spinoff of the pharmaceuticals business to Mallinckrodt (MNK). It was all for nothing.

[Read: More Saintvilus: Johnson & Johnson: Nothing to Fix Here]

I've been a long-time supporter of this company. In fact, since I first recommended the stock last May, shares of Covidien have soared more than 30%. It didn't take long for management's decision to pay start paying dividends. Investors who listened to me did very well.

The Street, meanwhile, was busy inciting fear about Covidien's prospects. I saw something else. While larger med-tech rivals like Abbott Labs (ABT) and Johnson & Johnson (JNJ) began showing signs of slowing growth, Covidien looked revived. The company began posting solid results quarter after quarter.

Management seemed more focused. They were operating with pinpoint execution. But I don't believe some analysts truly understood what management was actually trying to do. They cited the spinoff as some negative event, solely on the basis of lost revenue.

In actuality, the outcome produced a much leaner operation - one with the potential for long-term margin expansion. And with another solid beat this quarter in both revenue and profits, management is leaving no stone unturned to continue proving the Street wrong.

Revenue was up 3% this quarter on a reported basis. Even more impressive was that the company posted 5% organic growth, which beat Street estimates by 1%. Aside from the spinoff of the pharmaceuticals business, the company has never been shy about doing deals to grow the top line.

In December, Covidien spent $860 million to acquire Given Imaging (GIVN), a company with close to 90% global share in the growing endoscopy market. It was a worthwhile deal with the gastrointestinal market worth an estimated $3 billion. But with organic growth advancing 5%, management is demonstrating that it still has a strong grip on the core operation.

What's more, with 8% growth in the Surgical Solutions, the company is performing as better (in some cases, better) than Johnson & Johnson and Stryker (SYK). And contrary to what is being said, with revenue in neurovascular advancing 4% this quarter, I don't believe Stryker has significantly outperformed Covidien.

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