Background. Percutaneous coronary intervention (PCI) with either drug-eluting stents (DES) or bare metal stents (BMS) reduces angina and repeat procedures compared with optimal medical therapy alone. It remains unclear if these benefits are sufficient to offset their increased costs and small increase in adverse events. Objective. Cost utility analysis of initial medical therapy v. PCI with either BMS or DES. Design. Markov cohort decision model. Data Sources. Propensity-matched observational data from Ontario, Canada, for baseline event rates. Effectiveness and utility data obtained from the published literature, with costs from the Ontario Case Costing Initiative. Target Population. Patients with stable coronary artery disease, confirmed after angiography, stratified by risk of restenosis based on diabetic status, lesion size, and lesion length. Time Horizon. Lifetime. Perspective. Ontario Ministry of Health and Long Term Care. Interventions. Optimal medical therapy, PCI with BMS or DES. Outcome Measures. Lifetime costs, quality-adjusted life years (QALYs), and the incremental cost-effectiveness ratio (ICER). Results of Base Case Analysis. In the overall population, medical therapy had the lowest lifetime costs at $22,952 v. $25,081 and $25,536 for BMS and DES, respectively. Medical therapy had a quality-adjusted life expectancy of 10.1 v. 10.26 QALYs for BMS, producing an ICER of $13,271/QALY. The DES strategy had a quality-adjusted life expectancy of only 10.20 QALYs and was dominated by the BMS strategy. This ranking was consistent in all groups stratified by restenosis risk, except diabetic patients with long lesions in small arteries, in whom DES was cost-effective compared with medical therapy (ICER of $18,826/QALY). Limitations. There is the possibility of residual unobserved confounding. Conclusions. In patients with stable coronary artery disease, an initial BMS strategy is cost-effective.