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St. Jude's Growth Is Looking Sickly

Stocks in this article: STJ JNJ MDT BSX

NEW YORK ( TheStreet) -- There isn't much a company can do when investors have fallen in love with their stock. Shares of St. Jude Medical (STJ) have soared close to 40% over the past six months, management has done nothing to taper the optimism. This is a good thing. But I don't see where there's meaningful value left for new investors.

The good news is that the company continues to make progress and has moved on from prior controversy over its Riata leads. You can argue that the depths from which St. Jude has emerged is enough to believe the worst is over. That may be so.

My problem is that growth has sputtered. At best, the recent results have not justified the valuation. And with better bargains out there such as Johnson & Johnson (JNJ) and Medtronic (MDT), St. Jude's execution has to be perfect over the next several quarters to sustain this level.

With fourth-quarter revenue advancing roughly 4% year over year, I've developed doubts about St. Jude's clinical pipeline. Given that the company just reported (in my opinion) its fifth consecutive so-so quarter, I worry that investors are showing too much patience waiting on St. Jude to produce the sort of returns the valuation presumes.

In fairness, there wasn't anything to be surprised about in St. Jude's earnings report. In most cases, that would be a good thing. But investors aren't paying for non-events. Not at almost twice the multiple of Medtronic.

As I've said, though, the company is making progress. The 6% year over year growth in its Cardiac Rhythm Management was one notable example. I was equally pleased (even stunned) to see the 7% jump in the implantable cardioverter defibrillators  business.

If you recall, in the October quarter the ICD segment grew at just 3%. And there were concerns that St. Jude was bleeding market share to Medtronic and Boston Scientific (BSX). Truth be told, I was one of those critics. But I can't say that I feel the same way today.

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