The medical equipment giant published its annual results last week.
The share price hasn't moved in seven years. Nor have sales, and perhaps this explains why. Fiscal 2023 marks no break with the past, with sales reaching $31.2 billion, half a billion less than last year.
The cardiovascular, neuroscience and diabetes segments are stable, while the surgical equipment segment is slowing down markedly. To the Group's credit, this decline does not spare any of the sector's players: it is the result of high customer inventories following the reduced number of interventions during the pandemic.
Medtronic is committed to its status as a dividend aristocrat, and points out that it has consistently increased its payout over the past forty-five years. This year is no exception. Forty-sixth consecutive dividend increase, to $0.69 per share per quarter.
Returns of capital to shareholders - in addition to dividends, ongoing share buy-backs, alas not always carried out at attractive valuations - remain well covered by cash flow. On the other hand, net debt has risen by $11 billion over the past decade, equivalent to two and a half years of profits.
This would not necessarily raise eyebrows if these amounts had been invested wisely. But has it? The $18 billion spent on external growth - net of asset disposals - has so far generated only a very modest return on investment.
As proof of this, free cash flow has barely increased over the cycle. After inflation, it stagnates or even declines. Where there has been real growth, however, is in stock options, which do not seem to bother the highly institutional and fragmented shareholder base.
Medtronic remains a world leader in medical equipment, with a strategy built around consumables - the most attractive product category - and a sprawling distribution capacity. However, the current valuation offers little margin of safety in the light of the above factors.
Should we be amused? The press release accompanying the annual results states at the top of the page that Medtronic is entering into a "strategic collaboration" with Nvidia to "accelerate in artificial intelligence".
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