World's Best Health Care Stock

Stryker Provides Artificial Hips & Operating Room Surgical Equipment

Aug 3, 2007 Daniel Workman

Around the globe, the most powerful force propelling medical technology investments is the vast cohort of wealthy baby boomers.

In the United States alone, some 76 million adults ages 43 to 61 (born between 1946-1964) represent an estimated US$1.1 trillion in spending power.

By 2030, baby boomers will span ages 66 to 84 and account for a fifth of the total American population.

Artificial Joint Replacements

As the population grows older, debilitating diseases including rheumatoid arthritis, osteoarthritis and osteoporosis damage deteriorating body joints. More active lifestyles of people over 50 combined with the availability of greatly improved implant surgeries has led to an unprecedented demand for replacement hips, knees, shoulders and spinal implants.

In the past, artificial knees and hips were typically implanted into older clients with the expectation that the patient would not outlive the functionality of the surgical replacement. Today it's not uncommon for one person to have multiple replacement procedures.

Stryker Corporation

Stryker (SYK on NYSE) develops, makes and sells specialized medical and surgical products that meet the needs of ageing baby boomers.

Stryker’s products include:

• Orthopaedic implants (57% of 2006 sales) including artificial hips, knees, shoulders and spinal implants.
• Medical and surgical equipment (38%) such as powered surgical saws and drills, miniature medical video cameras used in minimally invasive surgery, customized stretchers for acute care and speciality surgery facilities, as well as plate and screw systems for surgical repairs to the small bones in the hands, face and head.

In June 2007, the company sold its outpatient physical therapy business (5%).

A Great Stock

One of the few truths on which all investment advisors agree is that, over the long term, a company’s stock price will go up if management generates consistent gains in both revenues and earnings.

Stryker’s financial performance has been stellar for almost 20 years. Since 1997, net sales have grown a compound average of 21% per year from $980 million to $5.4 billion in 2006.

Some investment newsletters point to Stryker’s revenue growth slowing to 11% in 2006, and an ongoing Department of Justice investigation into possible violations of anti-trust laws.

Nevertheless, Stryker’s management continues to display the business acumen and financial talent needed to grow earnings at a remarkable rate of 21% in 2006. Adjusted diluted net earnings per share (EPS) have increased by 24% annually from $0.32 to $2.02 in 2006.

Loyal Stryker shareholders continue to be rewarded. The stock has split twice since 1997. Stryker’s share price has risen over 800% from $7 (adjusted for splits) in 1997 to about $64 currently.

International Health Care’s Brightest Star

Stryker remains the world leader in orthopaedics with sales of $4.3 billion in 2006 and a 15% market share. The company is also the number one maker of operating medical and surgical equipment with a 33% market share.

Stryker’s sales are currently concentrated in the U.S. (65.8% of company totals) principally because the American orthopaedic surgical industry is much more mature than in other countries.

Worldwide Orthopaedic Market by Geography

• US … $18.3 billion (64% of global orthopaedic market, 12% annual growth)
• Europe … $6.8 billion (23%, 6% growth)
• Japan … $1.6 billion (6%, 0% growth)
• Pacific … $1.1 billion (4%, 8% growth)
• Canada & South America … $800 million (3%, 7% growth).

As affluent baby boomers around the world become more educated about possibilities of minimally invasive orthopaedic surgery, Stryker is well-positioned to grow its revenues and earnings over the next 20 years.

Sources for this Article

This article presents independent insights from data presented in MetLife’s Mature Market Institute ‘A Profile of American Baby Boomers’ and the Stryker Fact Book 2006-2007 on stryker.com.

Note: Suite101 does not offer investment advice. Instead, we seek to educate and inform our readers by sharing insights about the latest trends and news from the world of finance.

The copyright of the article World's Best Health Care Stock in Investment is owned by Daniel Workman. Permission to republish World's Best Health Care Stock in print or online must be granted by the author in writing.

Stryker orthopaedic implants & surgical equipment