$94.78
$274.08
bear $94.78
base $198.94
bull $274.08
margin of safety $95.00
market price* $294.66
Stryker sells orthopaedic implants (knees, hips, trauma, shoulders), the Mako surgical robot that is used to place them, and a broad range of hospital equipment, surgical instruments, endoscopy, neurovascular and, since 2025, vascular products (the $4.8 billion Inari Medical acquisition). Revenue was $25.1 billion in 2025, about 11% above 2024, and the first half of 2026 ran a further 6% ahead of the first half of 2025 with operating cash flow up about 35%. The economic engine is recurring: each Mako robot placed in a hospital pulls through Stryker's implants and disposables for years, and surgeons trained on the system rarely switch. How we measured earnings. We use cash the business generates after its own costs of staying in business: operating cash flow, with stock-based compensation charged as a real cost, only the maintenance portion of capital spending deducted, and swings in receivables, inventory and payables removed. Large non-cash charges (intangible amortisation of about $0.7 billion a year, the roughly $1 billion of write-downs in 2024 tied in part to the sale of the spinal implants business, and the $170 million in 2025) are added back because they are sunk acquisition cost, but we carry the idea that acquired product lines age in the growth path rather than in the earnings level. Product-recall payments, which hit 2016 to 2021 (including $526 million in 2017 for the hip recall), are left in as real cash costs. On this basis per-share owner earnings were $4.52, $2.13, $5.56, $6.54, $5.88, $7.15, $8.26, $9.18, $10.42 and $11.66 for 2016 through 2025. Because Stryker's lenders are paid before shareholders, we add back cash interest ($582 million in 2025) to get the cash the business produces before its lenders: $13.16 per share in 2025, $11.45 in 2024, $10.11 in 2023. Our starting level is $11.45, the middle of the 2023-2025 results. We excluded 2021 (the rebound from the pandemic) and 2022 (inflation and integration costs) as less representative, and deliberately did not start from the highest, most recent year. Growth in this stream was 14.9% in 2025; our base case starts at 6%, well below that, and shows no reliance on any reversal. One judgement matters: working-capital build has absorbed cash in nine of the last ten years (about $550 million a year, roughly $1.40 a share). We strip it out as timing (about 12% of business value), but it is persistent, and we reflect it in the bear case and in how we price. Debt. Stryker owes about $14.9 billion, almost all fixed-rate senior notes with an average coupon near 3.5% (many euro notes below 2%), against $3.4 billion of cash at mid-2026. Because that debt is cheap for years, we reduce what it is worth by about $1.65 billion; after also keeping about $0.7 billion of cash as operating needs, net debt is about $27.46 per share. About $750 million falls due within a year (the 4.55% notes due February 2027 and commercial paper) and about $4.0 billion across 2027-2028; operating cash flow of roughly $5 billion a year covers these, and interest is only about $1.55 per share against $10 to $13 of cash flow in every case. Base case: the business is worth about $226 per share before debt; it owes $27.46; shareholders' value is about $198.94. Cash flow grows from $11.45 at 6% in year one, tapering to 3% by year ten (about $17.9 per share), which is below the roughly 9% revenue and 11% per-share cash-flow growth of the past decade. What is credited is the recurring implant and disposable volume pulled through by the installed base of Mako robots, which has lifted sales in nine of the last ten years. Not credited: new products such as Mako Shoulder, Inari's expansion, margin gains, or any further acquisition. After year ten we hold the level flat for ten years because the installed base, surgeon training and a franchise record of several decades do not disappear, then let it decline 6% a year as individual products age. Bear case: business value about $122 per share, less $27.46, leaves about $94.78. It includes a pandemic-style procedure shutdown in year one (in 2020 cash flow fell about 8% from 2019), a hip-recall-sized cost of about $3.50 per share spread over years two to four (2017's recall cost $526 million in one year), a second procedure downturn in year six, only 1% growth otherwise, working-capital absorption of about $0.50 a share a year, and a faster decline after year thirteen. Cash flow stays well above interest throughout, so the debt is serviced. Bull case: about $301 per share before debt, $274.08 after. Growth continues at 10% falling to 5% over ten years, consistent with the actual per-share cash-flow growth of 2019 to 2025 (about 10% a year) and Mako pull-through continuing, then flat for ten years and a 4% annual decline after. Challenges tested. If working capital were truly a permanent cost, the base value would be roughly 14% lower, about $172. If a recall costs more than the 2017 hip episode, that falls in the bear range. We found no material cybersecurity incident described in the 2025 annual report, and first-half 2026 cash generation was up sharply, so we assign no cost to one. The 2024 and 2025 write-downs show acquisitions do not always earn their cost, which is why no acquisition-driven growth is credited in any case. How sure we are. Fairly sure of the level of earnings: ten years of audited cash-flow records, revenue that fell in only one year (2020, -3.6%) and a recurring-revenue model. Less sure of how much working-capital cash the growth will keep consuming and of recall or litigation risk, which has cost Stryker over $1 billion in cash in the past decade. The worst plausible case, a recall of that size coincident with a procedure downturn, would not threaten the structure: debt is long-dated and fixed, and cash flow covers interest about six times even in the bear case. The price assumes a holding period of about five years, with a dividend of roughly $3.50 a share a year. The margin-of-safety price is $95: from that price, even with the base case about 14% weaker than we show, five years of dividends and business value growth imply about 20% a year, and the bear case implies a positive annual return rather than a loss. Previous estimates were on a different basis and are not comparable.