Medical Device Link.

Originally Published MX May/June 2004

COVER STORY

For most medical device companies, setting goals for annual growth can be an agonizing exercise conducted in a flurry of market research and a frenzy of sales predictions. But when executives of Stryker Corp. (Kalamazoo, MI) conduct their annual budget-planning sessions, one goal is already a given: Net earnings growth will be at least 20%.

The company's practice isn't remarkable for its novelty. In fact, the 20% goal has been a company mainstay since John W. Brown was named president and CEO of Stryker in February 1977. But Stryker's success at achieving the goal is certainly remarkable.

Earnings growth for Stryker Corp. from 1976 through 2003. (click to enlarge)

Over the past 27 years, Stryker has compiled a compound annual earnings growth rate (CAGR) of 25%, including a 21-year run (from 1976 to 1997) during which the company's earnings growth exceeded 20%. That streak took a five-quarter detour in 1998, when Stryker decided instead to invest its earnings in the $1.65 billion purchase of Howmedica—a move that nearly doubled the size of the company.

Stryker's record of growth has also paid off with investors . The company was listed on the NASDAQ exchange for 18 years, but jumped to the New York Stock Exchange (ticker: SYK) in 1997. From a share price of less than $10 in 1993, the company's stock has made a steady climb upward. This year, at the end of April, Stryker stock closed briefly at more than $100 per share before settling back in the high 90s the following day.

Stryker's climbing share price led company executives to announce a 2-for-1 stock split at the company's annual shareholders meeting at the end of April. The announced move marks the ninth time that Stryker shares have split in the 25 years since the company went public in 1979. And considering the company's track record, it's a pretty fair bet that investors haven't yet seen the top of Stryker's growth curve.

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