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Questions About Smith & Nephew
We are maintaining a Hold recommendation on Smith & Nephew, Plc (SNN - Snapshot Report), after the British medical device maker's first-quarter results. The company is benefiting from its Earnings Improvement Program, and we believe the recent stock buyback should provide support to the stock. The stock is trading below its peers, but with the uncertainty surrounding sales practices at its European subsidiary, there is little upside in the near term.
The company follows an effective strategy of investing a significant amount in research and development activities, to bring new products to market. This strategy has yielded results in the past, and should contribute to growth going forward. To meet the increased demand for new and existing products, the company intends to grow its sales team by at least 10 percent per year, a process that particularly bodes well for the rapidly growing orthopaedics segment.
However, this division faces tough competition in both domestic and international markets. While increasing its sales force is helpful, SNN might do better if it were to buy out smaller rivals.
The stock is currently trading at 18.0x our 2008 EPADS estimate which is slightly lower than the average of its peers of 19.6x. Our six-month price target is $57.
Read the full analyst report on SNN
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| Market Summary | Feb 10, 2010 09:57 am ET |
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