Medtronic (MDT): Revenue Accelerates, the Multiple Does Not

Medtronic’s revenue grew 14% last quarter, the fastest of the last eight, and the stock still trades at 22.7 times trailing earnings. That combination does not show up often. It is rare, in fact. Usually a business that is accelerating gets a richer multiple, not a cheaper one, so I went looking for what the market thinks it knows that the growth number does not yet show.

Two years of slow quarters just broke

Go back eight quarters and the growth line at Medtronic reads 5.2%, 2.5%, 3.9%, 8.4%, 6.6%, 8.7%, 9.9%, and now 14%. That is not a single good quarter. It is a climb, and the last print, $9.8 billion in revenue, is the first time in that stretch growth has cleared 10% by a wide margin, according to Medtronic’s most recent quarterly filing on SEC EDGAR. Net income for the quarter was up 41.3% from a year ago, against 18.7% the quarter before that. The earnings line moves in bigger swings than the revenue line, which is normal for a company still working through cost pressure in some of its device categories, but the direction of both is the same.

I read an acceleration like this one of two ways. Either the device replacement cycle that stalled for years is finally turning, or a handful of large hospital orders landed in the same quarter and flattered the number. Medtronic’s own quarterly pattern argues for the first reading, since the climb has been steady rather than a single spike.

One strong print is still one strong print, though, and I want a second one before I call it a trend.

Cardiovascular is doing the heavy lifting

Cardiovascular is 40.3% of revenue, neuroscience is 27.4%, and medical surgical is 23.4%, with the rest split across smaller categories on the company’s investor site. None of those weights has shifted much in years, so the acceleration is not coming from a new business line taking share inside the company. It is coming from the existing franchises selling faster, and cardiovascular in particular, which includes the cardiac rhythm and structural heart businesses that have been the subject of new product launches over the past two years. A piece I wrote on Cintas made the same point about a different company: when growth speeds up without a mix shift, the story is usually demand, not a new segment carrying the average.

A multiple near the bottom of its own range

Here is the part that does not fit cleanly. Medtronic’s trailing P/E of 22.7 sits about 17% below its own five-year average of 27.2, and the forward multiple is 19.4. Price to sales is 3.2, below the five-year average of 3.6. Price to book is 2.4, also under its 2.3 average. By every multiple I checked, the stock is cheaper against its own history than the growth trend would suggest it should be. That is a different claim than saying it is cheap in absolute terms, and it is the one I trust more, because a company’s own multiple history strips out sector-wide swings in sentiment that a peer comparison can smuggle in.

I compared this to what I wrote about Microsoft trading near 27.5 times earnings: a stock with a stable, well-understood growth rate usually holds a multiple close to its own average, plus or minus a couple of points. Medtronic breaking meaningfully below its average while growth improves is the unusual case, not the normal one.

What the sell side still wants to see

Analyst coverage has not caught up to the acceleration, or does not believe it will last. Of the 19 analysts covering the stock, 63% rate it Buy and the rest Hold, with none at Sell. The average price target is $104, about 13% above where the stock trades now, with the high estimate at $118 and the low at $85. A target range that wide, and a hold percentage above a third of the group, usually means the analysts are waiting for a second data point before raising numbers. One quarter of acceleration, even a clean one, is not enough to move a 19-person consensus by itself.

That gap between the multiple and the rating mix is worth sitting with. If the growth holds, the average target has room to move up rather than the stock having to fall to meet it, and that is the more constructive way to read a wide analyst spread. If the growth does not hold, the current multiple is not obviously cheap anymore, since a device company growing in the mid-single digits has traded closer to 27.2 times earnings than 22.7 for most of the last five years.

The stock barely reacted to the good news

Options pricing implied an average earnings-day move of 3.1% for Medtronic over its recent reporting history, and the actual move on September 1 was +1.5%, smaller than that average even though the revenue number was the best of the stretch. Go back further and the pattern is more telling. The four reports before this one, stretching from November 2024 to February 2026, all moved the stock down on the day it reported: roughly 3%, 2%, 7%, and 3% declines. The two most recent moves were positive, 5.7% in June and then 1.5% now, and both landed in the same window where quarterly growth crossed back above 8% and then kept climbing.

That is a cleaner signal than the multiple on its own. The market has started rewarding the acceleration. It just has not rewarded it by much, and the size of the reaction has not been enough to close the gap between today’s multiple and the five-year average. A bigger move on the next report, in either direction, would tell me more about how much of this the market has already priced in than another quarter of the growth number alone.

The quant score moved the other way

Here is my one explicit uncertainty, and it is a real one. The quant score on this stock was a B as recently as September 15, then dropped to a D by September 16 and has held there since, even as the revenue print that came out two weeks earlier was the best of the stretch. A model-driven score turning down right after a strong fundamental quarter is not something I can explain away with a story about mix or demand. It could be picking up on price action, short-term technicals, or something in the estimate revisions that has not shown up in the headline numbers yet. I do not know which, and I would not ignore it just because the growth narrative is the one I find more interesting.

The counter-case to my read is straightforward: if the next quarter’s growth rate falls back under 10%, the acceleration was a base-effect blip and the multiple was cheap for a reason. That is the scenario the quant downgrade would be consistent with, and it is the one that would change my mind fastest.

The dividend eats most of the earnings

Medtronic pays a quarterly dividend that moved from $0.71 to $0.72 in the middle of this year, putting the trailing yield at 3.09%. Trailing dividends per share are $2.85 against trailing EPS of $4.06, a payout ratio of about 70%. That is a high payout for a company whose earnings growth has been uneven, and it leaves less room to keep raising the dividend at the same pace unless the EPS line grows into it. The forward EPS estimate of $4.74 implies 17% growth, which would bring the payout ratio down closer to 60% if it holds, but forward estimates are exactly the kind of number that a demand-driven acceleration either confirms or breaks.

Metric	Current	5-year average
P/E (trailing)	22.7	27.2
P/E (forward)	19.4	n/a
Price/sales	3.2	3.6
Price/book	2.4	2.3
Dividend yield	3.09%	n/a

What would settle the question

I would treat the next quarterly report as the real test, since a single quarter of 13.7% growth against a soft prior-year base is suggestive, not proof. Two consecutive quarters above 10% would tell me the device cycle has actually turned, and it would also be the kind of evidence that could pull the multiple back toward its five-year average even without the stock moving much, because the earnings side of the ratio would be doing the work. Until then, the honest way to describe this stock is cheap against its own history, with a fundamentals story that just improved and a quant model that just disagreed with it. I would watch the quarterly growth number more closely than the target price, since analysts are still working off one quarter of evidence and I am too.

For anyone comparing this against other cheap-looking names in health care or industrials, what a 15 times earnings multiple gets you at JPMorgan is a completely different business, but a useful reminder that a low multiple by itself never answers the question of why it is low.

Analysis and opinion only, not investment advice. Figures come from Medtronic’s quarterly filings on SEC EDGAR and its investor site, and valuation multiples were checked on September 18, 2026.