This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why St. Jude Medical Has Become a Must-Own Medical Device Stock

Stocks in this article: STJ EW BSX JNJ ISRG MDT

NEW YORK ( TheStreet) – With Edwards Lifesciences (EW) and Boston Scientific (BSX)   trading at near 52-week highs, there aren't many bargains left in medical devices stocks. But St. Jude Medical (STJ) , after a recent 10% pullback, can offer investors exceptional value while also producing the growth Wall Street craves.

The stock, at close to $65, is up close to 5% on the year to date, trailing the medical devices sector's 7.56% gain, according to Morningstar. But since St. Jude hit $71.90 on July 7, the company has lost 10% of its value. I don't believe this decline was justified.

St. Jude now offers appealing growth and value qualities in an otherwise bloated devices sector.

The industry's price-to-earnings ratio stands at 25.33, according to Yahoo! Finance. Yet, both Boston Scientific and Edwards are trading at multiples of 45 and 35, respectively. St. Jude, meanwhile, carries a ratio of 25.

More important to consider, especially in light of the 10% pullback, is these shares are trading on a forward multiple of 14, based on estimates of $4.32, according to Yahoo! Finance. This compares to a forward multiple of 26 for Edwards. Not to mention, St. Jude outperforms Edwards in operating margin, which suggest management is able to do more with the revenue it generates.

In other words, Wall Street isn't ready to credit management for some of its restructuring and value-building efforts, many of which should fuel long-term growth.

The last time I talked about St. Jude, these shares traded at around $68. I told you to wait for a pullback. Now it's time to pull the trigger. At current levels, St. Jude stock should trade at around $75 in the next 12 to 18 months, gaining more than 15%. It is still below analysts' highest price target of $81, according to Yahoo! Finance.

St. Jude recently completed the acquisition of NeuroTherm, a privately held company that specializes in chronic pain devices. Not only did this move enhance St. Jude's pain solutions portfolio, St. Jude is now the only name in the industry with capabilities in radiofrequency ablation (RFA) for spinal cord stimulation and can treat spinal pain.

Radiofrequency ablation is a procedure that uses electrical current produced by radio waves to help minimize pain signals in targeted areas. This acquisition for NeuroTherm, while not a game-changer based on its $200 million cash value, is precisely the key thing St. Jude needs to differentiate itself and help increase market share in a highly competitive environment.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs