Smith & Nephew: Potential Only Has Value If You Can Execute

Long a laggard in the ortho space, I was more bullish on Smith & Nephew (NYSE:SNN) last September on what I thought were cogent plans from a relatively new management to address and reverse this long-term pattern of underperformance. While a year and change may not be giving them enough time, particularly given the disruptions created by the pandemic, the reality is that the company hasn’t made the expected progress and isn’t getting the job done in either revenue growth or margin improvement.

With that ongoing disappointing run of performance, the share price has suffered, falling another 25% or so since my last update and underperforming peers/rivals including Stryker (SYK) and Zimmer Biomet (ZBH), but managing to outperform Enovis (ENOV). While the shares do look undervalued even without significant near-term improvement, I think it’s hard to make an argument for owning them without more evidence of real traction with the self-improvement initiatives.

 

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Smith & Nephew: Potential Only Has Value If You Can Execute