By Dan Victor
Medtronic is deeply undervalued and a good bet for your portfolio.
This statement may sound slightly outrageous to anybody who has followed the stock. Some skepticism is understandable. The medical-devices company has a reputation for underwhelming investors, and, as Deutsche Bank's Pito Chickering puts it, "a history of two steps forward and one step back." That was also our verdict when we last covered Medtronic as an 'On the Radar' idea for Barron's Investor Circle members in February. At the time, an uncertain growth outlook kept us from recommending the stock.
Four months later, it's time to retire the narrative of Medtronic as a perpetual laggard.
Medtronic's fourth-quarter results, reported June 3, beat estimates. The company also raised guidance. Revenue rose 9.9% year over year to $9.7 billion, driving full-year growth to 8.4% -- the strongest annual top-line performance in the past 10 years. We think Medtronic is just getting started.
Trading at 14 times earnings and yielding 3.7%, Medtronic offers the rare combination of value with high growth potential. The stock could rise to $120, implying a 20-times-fair-value earnings multiple and more than 50% upside over the next 12 months.
RBC Capital Markets analyst Shagun Singh is among the bulls on Wall Street. "MDT is at the front-end of the most significant innovation cycle in its history," he wrote earlier this year. Following the fourth-quarter earnings report, Singh reiterated an Outperform rating with a price target of $118.
Medtronic's cardiovascular portfolio has stood out. The segment contributes approximately 39% of total sales and posted an impressive 10% year-over-year increase in revenue, to $3.8 billion in the last quarter. Within that amount, Cardiac Ablation Solutions $(CAS)$ has quickly emerged as a major growth driver, with a 78% increase in revenue worldwide and a 124% year-over-year jump in the U.S.
The CAS business is growing at twice the market rate, gaining eight percentage points of market share. Compared with traditional tools that use extreme thermal temperatures to correct problematic heart tissue conditions, pulsed field ablation (PFA) uses high-voltage pulses that minimize damage to surrounding tissues.
Medtronic has an advantage as the only company with two distinct Food and Drug Administration-approved PFA platforms: PulseSelect, a pure-play PFA device, and the Affera System, which combines dual-energy PFA and radio-frequency capabilities with integrated cardiac mapping. Clinical trials found the system reduced procedure times and improved clinical outcomes.
"We're still in the early innings for Affera," CEO Geoff Martha told investors during the fourth-quarter earnings conference call. "In the U.S., we increased our installed base by 40% sequentially with a significant runway for continued expansion."
The trajectory is a significant improvement over what rival Boston Scientific is experiencing with its first-to-market Farapulse PFA. The company specifically cited its lost market share in PFA as a culprit leading to a downward revision to its full-year outlook. The stock is down 51% year to date.
Medtronic is winning, and its portfolio strength extends well beyond the cardiovascular group.
In neuroscience, fourth-quarter revenue was up 5%. Medtronic is a key player in the $15 billion cranial and spinal technologies market. Its AiBLE surgical platform combines AI-driven predictive software with specialized hardware components that offer an expanding list of applications.
This year, Medtronic received FDA clearance for the new Stealth AXiS Spine application to brain surgery procedures. With half of product revenue tied to consumables, the expectation is for the expanding installed base to generate more consistent and high-margin cash flows over time.
Perhaps the most exciting part of the Medtronic business is the Hugo robotic-assisted surgery (RAS) system in the medical surgical group. The business was started in 2025 and received clearance for urology procedures in the U.S. Medtronic has filed submissions for general surgery and gynecologic indications. The opportunity is for the company to begin chipping away at the near monopoly rival Intuitive Surgical commands.
The core Hugo RAS device is priced at an estimated 40% discount to Intuitive's flagship da Vinci system. While robotic procedures still account for less than 5% of all surgeries, the global market is projected to more than triple over the next decade to more than $54 billion, according to research from Fortune Business Insights. The potential for Medtronic to capture an increasing slice of this high-tech category is a major growth driver for the company.
Medtronic has spun off its diabetes segment, which began trading as a stand-alone company, MiniMed Group, in March. While Medtronic still maintains a majority stake in the group, and thus reports the segment consolidated into its results, the plan is to divest its remaining 90% holding over the next year.
The cash raised will strengthen its balance sheet and has already facilitated some recent strategic transactions. This year, Medtronic acquired Scientia Vascular, a manufacturer of access catheters, along with nerve simulation company SPR Therapeutics.
For the year ahead, Medtronic is guiding for organic revenue growth between 6.75% and 7.25%, improving from the 5.8% result in fiscal 2026. The company is also targeting adjusted earnings between $5.90 and $6 per share, an 8% increase at the midpoint from $5.53 last year. The trend is good news for investors eyeing the 72-cent per share quarterly dividend that yields 3.7%. Medtronic has hiked its dividend for 49 consecutive years and remains on track to keep the streak going.
Through this rapidly improving outlook, Medtronic continues to trade at a discount to medical-devices peers and to its own historical valuation multiples. The stock currently changes hands at 13.5 times forward earnings, versus its 10-year average of almost 16. Medtronic's price/ sales ratio of 2.8 is also bargain next to a current group average of 4 commanded by Abbott Laboratories, Boston Scientific, Johnson & Johnson, and Stryker. The disconnect doesn't seem justified considering Medtronic's tailwinds.
Risks to the investment thesis center on execution. Any setback in receiving FDA clearances or signs of waning momentum in high-growth categories would likely keep shares under pressure. Similarly, the competitive space is worth watching for the possibility that competitors launch new medtech devices that could undermine Medtronic's advantage.
For now, investors have a great opportunity to pick up shares in a beaten-down industry leader positioned to reward shareholders as growth ramps up. There's good value in Medtronic.
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June 18, 2026 07:01 ET (11:01 GMT)
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