Critical Analysis: Covidien (COV) and Hill-Rom (HRC)

Hill-Rom (NYSE: HRC) and Covidien (NYSE:COV) are both medical companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, profitability, dividends, earnings, valuation, institutional ownership and risk.

Risk and Volatility

Hill-Rom has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500. Comparatively, Covidien has a beta of 1.01, suggesting that its share price is 1% more volatile than the S&P 500.

Dividends

Hill-Rom pays an annual dividend of $0.72 per share and has a dividend yield of 0.9%. Covidien does not pay a dividend. Hill-Rom pays out 24.5% of its earnings in the form of a dividend. Hill-Rom has raised its dividend for 7 consecutive years.

Institutional and Insider Ownership

80.8% of Hill-Rom shares are owned by institutional investors. 1.9% of Hill-Rom shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Hill-Rom and Covidien’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hill-Rom 7.14% 20.24% 6.06%
Covidien 19.02% 20.06% 9.92%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Hill-Rom and Covidien, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hill-Rom 0 3 5 0 2.63
Covidien 0 0 0 0 N/A

Hill-Rom currently has a consensus price target of $94.86, indicating a potential upside of 18.00%. Given Hill-Rom’s higher possible upside, equities analysts plainly believe Hill-Rom is more favorable than Covidien.

Valuation and Earnings

This table compares Hill-Rom and Covidien’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hill-Rom $2.74 billion 1.94 $133.60 million $2.94 27.34
Covidien N/A N/A N/A $3.89 27.43

Hill-Rom has higher revenue and earnings than Covidien. Hill-Rom is trading at a lower price-to-earnings ratio than Covidien, indicating that it is currently the more affordable of the two stocks.

Summary

Hill-Rom beats Covidien on 9 of the 14 factors compared between the two stocks.

Hill-Rom Company Profile

Hill-Rom Holdings, Inc. is a global medical technology company. The Company operates through four segments: North America Patient Support Systems, International Patient Support Systems, Front Line Care and Surgical Solutions. The Company’s products and services include Patient Support Systems, Front Line Care and Surgical Solutions. The Company sells and rents its specialty frames and surfaces, and mobility solutions, as well as its clinical workflow solutions, in the United States and Canada through its North America Patient Support Systems segment, and in regions outside of the United States and Canada through its International Patient Support Systems segment. Its Front Line Care segment globally sells and rents respiratory care products, and sells medical diagnostic equipment and a diversified portfolio of devices that assess, diagnose, treat and manage a range of illnesses and diseases. Under its Surgical Solutions segment, the Company sells its surgical products globally.

Covidien Company Profile

Covidien Public Limited Company is a healthcare products company. The Company is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. The Company’s brands include Kendall, Nellcor, Puritan Bennett and Valleylab, among others. It has a presence in more than 70 countries, with products sold in over 150 countries. The Company’s segments include Medical Devices and United States Medical Supplies. Medical Devices includes marketing of advanced and general surgical solutions, peripheral vascular and neurovascular therapies, patient monitoring products, and airway and ventilation products. United States Medical Supplies includes products, such as nursing care, medical surgical, SharpSafety and original equipment manufacturer (OEM) products. The Company’s products include Surgical Solutions, Vascular Therapies, Respiratory and Patient Care.

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