Wright Medical May Be Hobbled Until The Ankle Business Re-Accelerates

Wright Medical (WMGI) shareholders didn't seem to be thrilled about the merger with Tornier, but looking back, it is the Tornier investors who probably have more to regret about that deal. Although backward-looking hypotheticals only get you just so far, it has been the shoulder business that Wright acquired in the Tornier deal that has been driving the business, while Wright's prior core lower extremity/ankle business has weakened considerably in the last two years.

I don't believe the lower extremity business is damaged beyond repair, but management absolutely has to execute better than it has and start regaining momentum versus rivals like Stryker (SYK) and Integra (IART) if the shares are to perform better. I'm still modeling long-term revenue growth in the high single digits and long-term FCF margins in the 20%s, which supports a mid-$20s fair value, but Wright Medical's weak execution makes this a "show me" stock at this point.

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Wright Medical May Be Hobbled Until The Ankle Business Re-Accelerates