Is Medtronic (MDT) A Suitable Value Pick Right Now?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Medtronic PLC MDT stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Medtronic has a trailing twelve months PE ratio of 19.30. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.34.

Further, the stock's PE compares favorably with the Zacks classified Medical - Products' trailing twelve months PE ratio, which stands at 22.62. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. In fact, Medtronic has historically always traded at a PE less than that of the industry's since the end of 2013.

Medtronic PLC Price and Consensus

Medtronic PLC Price and Consensus | Medtronic PLC Quote

This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite somewhat strong value metrics and why we are looking for in-line performance from the company in the near term.

Bottom Line

Medtronic is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Although boasting of a strong industry rank (Top 42% out of more than 250 industries), the company's Zacks Rank #3 somewhat dims the sparkle.

Headwinds like unfavorable currency movement and global economic uncertainties continue to adversely affect Medtronic. Also, several legal and regulatory issues are intimidating in the short term.

Nevertheless, the Covidien integration synergy continues meaningfully accelerating all three fundamental growth strategies of Medtronic – therapy innovation, globalization, and economic value. The company is also focused on product innovation and geographical diversification of business, which bode well for the long term.

So, value investors might want to wait for estimates and analyst sentiment to turn favorable in this name first, but once that happen, this stock could be a compelling pick.

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