Street Smart

Originally Published January/February 2001

Thomas J. Gunderson

Today's smart dollar is chasing medical technology companies. Medical technology companies are showing greater economic returns than the average company in Standard & Poor's 500. The average cash return on capital invested in one of the 18 companies included in the U.S. Bancorp Piper Jaffray medical technology group, for instance, has been far above and beyond the cost of that capital. How are medtech companies achieving these superior results?

One way is by investing wisely in internal operations. Internal investment is always a challenging task for companies. Company executives face an array of appealing possibilities, any of which could be equally capable of producing either substantial benefits or disastrous consequences. Should a company buy back shares? Build new manufacturing facilities in the United States or overseas? Add to its sales and marketing force? Increase the number of projects in development?