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Understanding Stryker’s Capital Allocation Strategy

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Mar. 1 2018, Updated 1:20 p.m. ET

Capital allocation strategy

Stryker’s (SYK) capital allocation strategy prioritizes acquisitions, dividends, and share repurchases. To this end, the company spent $831 million in acquisitions, $636 million in dividend payouts, and $230 million on the repurchase of shares in fiscal 2017.

In December 2017, Stryker announced the acquisition of Entellus Medical, a global medical technology company. Entellus Medical’s products are designed for the minimally invasive treatment of various ear, nose, and throat issues. Stryker paid $662 million for this acquisition.

Stryker also acquired Novadaq Technologies in September 2017 for $716 million. Novadaq is a developer of fluorescence imaging technology that provides surgeons visualization of blood flow in vessels and related tissue perfusion.

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Geographic segments

Stryker reports revenues from the United States and international regions. Revenues generated in the United States grew 10% from $8.2 billion in fiscal 2016 to $9 billion in fiscal 2017.

Revenues from international sales grew 9% from $3 billion in fiscal 2016 to $3.3 billion in fiscal 2017.

Stock performance

In the last year between February 27, 2017, and February 23, 2018, Stryker stock has risen 25%. In the same period, Boston Scientific (BSX), Halyard Health (HYH), and Zimmer Biomet Holdings (ZBH) had returns of 10%, 15%, and 1.6%, respectively.

The price-to-sales ratio for Stryker is 4.8x. Its price-to-book ratio is 6.0x, and its book value per share is 26.0x. Its return on assets, return on equity, and return on investments are 4.8%, 10.2%, and 12.1%, respectively.

In the next part of this series, we’ll explore Stryker’s financial performance.

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