Smith & Nephew plc (SN.L) | Investment Case

1. Company Snapshot

1.a. Company Description

Smith & Nephew plc, together with its subsidiaries, develops, manufactures, markets, and sells medical devices worldwide.The company offers knee implant products for knee replacement procedures; hip implants for the reconstruction of hip joints; and trauma and extremities products that include internal and external devices used in the stabilization of severe fractures and deformity correction procedures.It also provides sports medicine joint repair products for surgeons, including instruments, technologies, and implants necessary to perform minimally invasive surgery of the joints, such as the repair of soft tissue injuries and degenerative conditions of the knee, hip, and shoulder, as well as meniscal repair systems.

In addition, the company offers arthroscopic enabling technologies comprising fluid management equipment for surgical access, high-definition cameras, digital image capture, scopes, light sources, and monitors to assist with visualization inside the joints, radio frequency, electromechanical and mechanical tissue resection devices, and hand instruments for removing damaged tissue; and ear, nose, and throat solutions.Further, it provides advanced wound care products for the treatment and prevention of acute and chronic wounds, which comprise leg, diabetic and pressure ulcers, burns, and post-operative wounds; advanced wound bioactives, including biologics and other bioactive technologies for debridement and dermal repair/regeneration, as well as regenerative medicine products including skin, bone graft, and articular cartilage substitutes; and advanced wound devices, such as traditional and single-use negative pressure wound therapy, and hydrosurgery systems.It primarily serves the healthcare providers.

Smith & Nephew plc was founded in 1856 and is headquartered in Watford, the United Kingdom.

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1.b. Last Insights on SN

Smith & Nephew's recent performance has been positively driven by strategic partnerships and new product launches. The company teamed up with Standard Health to launch the UK's first orthopedic Ambulatory Surgery Center (ASC), aiming to boost surgical efficiency and drive growth. Additionally, it introduced a new medial stabilized insert for its LEGION Total Knee System, designed to improve kinematics, stability, and procedural versatility. The company's inclusion among the UK's Top 10 Safest Dividend Stocks also underscores its financial stability.

1.c. Company Highlights

Last Price	1265
Change Percentage	2.72%
Open	1228
Previous Close	1231.5
Market Cap ( Millions)	11051
Volume	2417319
Year High	1441.5
Year Low	937.8
M A 50	1311.52
M A 200	1197.47

FCF Yield	5.43%
Dividend Yield	2.27%
ROE	9.14%
Debt / Equity	62.39%
Net Debt / EBIDTA	192.68%
Price To Book	2.66
Price Earnings Ratio	29.83
Price To FCF	18.42
Price To sales	2.47
EV / EBITDA	12.15

2. Smith & Nephew: Strong Performance Amidst Headwinds, Looking Ahead to Growth

Smith & Nephew delivered a solid first half of 2025, with revenue growth of 6.7% driven by strong performance in all three business units. The company achieved a 100 basis point increase in trading margin, reaching 17.7%, thanks to significant cost savings realized through its 12-Point Plan and zero-based budgeting initiatives. Earnings per share surged by 37% to $0.335. Despite these positive results, the company faced headwinds from China, which negatively impacted revenue by 130 basis points. However, the company expects this impact to reverse in the second half, leading to a full-year impact of around 110 basis points.

Publication Date: Aug -07

                                    📋 Highlights
                                    Strong Revenue & Margin Growth:
                                                6.7% underlying revenue growth and 100 bps trading margin increase to 17.7% in H1 2025.
Cost Savings & EPS Boost:
                                                $50M savings from 12-Point Plan and zero-based budgeting, driving 37% EPS growth to $0.335.
Share Buyback Commitment:
                                                $500M share repurchase planned in H2 2025, funded by operational efficiencies and cash flow.
China Headwind Mitigation:
                                                130 bps H1 revenue drag from China, but full-year impact reduced to ~110 bps as headwinds unwind.
Full-Year Margin Guidance:
                                                Reaffirmed 19–20% trading margin target, supported by 240 bps of margin expansion in H1 and H2 step-up.

                                

China Impact and Outlook

While acknowledging the challenges posed by China's economic slowdown, the company remains optimistic about the long-term growth prospects in the region. The company is actively working to mitigate the impact of tariffs and macro-economic conditions by focusing on local production and expanding its distribution network.

U.S. Market Strength and Strategic Initiatives

"We are seeing sequential growth acceleration in U.S. Orthopaedics, U.S. Recon & Robotics, and Global Orthopaedics, driven by improved supply chain, commercial execution, and product launches," stated the CEO during the earnings call. This positive momentum is attributed to several factors, including the successful launch of new products, improved supply chain efficiency, and a strengthened commercial team.

Valuation

Currently, Smith & Nephew is trading at a P/E ratio of 60.87, indicating that investors are placing a premium on the company's future growth prospects. The P/B ratio of 3.0 suggests that the market values the company's tangible assets at a moderate level. Given its focus on innovation and expansion in high-growth markets, the company may continue to command a premium valuation.

3. NewsRoom

Smith+Nephew announces new category I CPT® code for its CARTIHEAL™ AGILI-C™ Cartilage Repair Implant

Oct -09

Source:

Orthopedic Digit Implants Market Report 2025-2033, with Profiles of Extremity Medical, Stryker, Zimmer, Smith & Nephew, Depuy, Arthrex, Acumed, Anika Therapeutics, VILEX, and Paragon 28

Oct -08

Source:

PBC Biomed Appoints Mark McMahan as Chief Commercial Officer

Oct -06

Source:

Smith+Nephew announce latest scientific data supporting new ALLEVYN™ COMPLETE CARE 5-Layer Foam Dressing for pressure injury prevention

Oct -03

Source: globenewswire.com

Smith+Nephew launches CORIOGRAPH™ Pre-Op Planning and Modeling Services for total shoulder arthroplasty

Oct -01

Source:

Smith & Nephew plc's (LON:SN.) Has Been On A Rise But Financial Prospects Look Weak: Is The Stock Overpriced?

Sep -17

Source:

Smith & Nephew (SNN) Upgraded to Buy: What Does It Mean for the Stock?

Sep -15

Source:

European Equities Traded in the US as ADRs Fall in Friday Trading

Sep -12

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.49%)

6. Segments

Orthopaedics

Expected Growth: 4.5%

Smith & Nephew's Orthopaedics segment growth of 4.5% is driven by increasing demand for joint reconstruction and sports medicine products, fueled by an aging population and rising obesity rates. Additionally, advancements in technologies such as robotics and 3D printing are expanding the addressable market, while strategic acquisitions and geographic expansion are further boosting growth.

Sports Medicine & Ear, Nose and Throat

Expected Growth: 4.2%

Strong demand for sports medicine products, driven by increasing participation in sports and recreational activities, coupled with growing adoption of minimally invasive ENT procedures, fuels 4.2% growth. Additionally, innovative product launches, expansion into emerging markets, and strategic partnerships contribute to the segment's growth momentum.

Advanced Wound Management

Expected Growth: 4.8%

Smith & Nephew's Advanced Wound Management segment growth of 4.8% is driven by increasing adoption of NPWT (Negative Pressure Wound Therapy) and debridement products, expansion in emerging markets, and a growing demand for advanced wound care solutions to address the rising prevalence of chronic wounds and diabetes.

7. Detailed Products

Hip Implants

Smith & Nephew's hip implants are designed to replace or repair damaged hip joints, providing patients with improved mobility and reduced pain.

Knee Implants

The company's knee implants are designed to replace or repair damaged knee joints, providing patients with improved mobility and reduced pain.

Sports Medicine Joint Repair

Smith & Nephew's sports medicine joint repair products are designed to repair and reconstruct damaged joints, tendons, and ligaments.

Arthroscopy Enabling Technologies

The company's arthroscopy enabling technologies are designed to facilitate minimally invasive surgical procedures, providing patients with less pain and faster recovery.

Trauma and Extremities

Smith & Nephew's trauma and extremities products are designed to treat a range of orthopedic trauma and extremities conditions.

Advanced Wound Management

The company's advanced wound management products are designed to promote wound healing and tissue repair.

Ostomy Care

Smith & Nephew's ostomy care products are designed to provide patients with a comfortable and secure ostomy experience.

8. Smith & Nephew plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Smith & Nephew plc is medium due to the presence of alternative products and services in the medical technology industry. While the company's products are highly specialized, there are still some substitutes available in the market.

Bargaining Power Of Customers

The bargaining power of customers for Smith & Nephew plc is low due to the company's strong brand reputation and the specialized nature of its products. Customers have limited bargaining power due to the lack of alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Smith & Nephew plc is medium due to the company's dependence on a few key suppliers for raw materials and components. While the company has some bargaining power, suppliers also have some leverage due to the specialized nature of their products.

Threat Of New Entrants

The threat of new entrants for Smith & Nephew plc is low due to the high barriers to entry in the medical technology industry. New entrants would need to invest heavily in research and development, manufacturing, and regulatory compliance, making it difficult for them to enter the market.

Intensity Of Rivalry

The intensity of rivalry for Smith & Nephew plc is high due to the presence of several established competitors in the medical technology industry. The company faces intense competition from rivals such as Johnson & Johnson, Medtronic, and Stryker, which has led to a highly competitive market.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	37.15%
Debt Cost	4.97%
Equity Weight	62.85%
Equity Cost	6.88%
WACC	6.17%
Leverage	59.11%

11. Quality Control: Smith & Nephew plc passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Smith & Nephew

A-Score: 5.0/10

Value: 3.1

Growth: 3.2

Quality: 5.9

Yield: 3.1

Momentum: 8.0

Volatility: 6.7

1-Year Total Return ->

Medacta

A-Score: 4.8/10

Value: 0.9

Growth: 6.6

Quality: 6.8

Yield: 0.6

Momentum: 7.0

Volatility: 6.7

1-Year Total Return ->

Getinge

A-Score: 4.3/10

Value: 3.4

Growth: 3.8

Quality: 5.2

Yield: 3.1

Momentum: 4.0

Volatility: 6.0

1-Year Total Return ->

Vitrolife

A-Score: 3.5/10

Value: 2.1

Growth: 7.4

Quality: 6.9

Yield: 0.6

Momentum: 1.0

Volatility: 3.0

1-Year Total Return ->

Ambu

A-Score: 3.0/10

Value: 0.8

Growth: 5.9

Quality: 6.2

Yield: 0.0

Momentum: 2.0

Volatility: 3.0

1-Year Total Return ->

GN Store Nord

A-Score: 2.8/10

Value: 5.5

Growth: 4.2

Quality: 4.1

Yield: 0.0

Momentum: 2.0

Volatility: 1.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-1.66%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.17%

Smith & Nephew plc - GB0009223206

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SN

1.c. Company Highlights

Less Volatile

Average Growth

Average Yield

Revenues Miss

Earnings Miss

Fairly Valued

Lower Growth

Expensive

Revenues Beats

Higher Yield

Earnings Beats

Medium Volatility

Stable Momentum

Strong Momentum

2. Smith & Nephew: Strong Performance Amidst Headwinds, Looking Ahead to Growth

China Impact and Outlook

U.S. Market Strength and Strategic Initiatives

Valuation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.49%)

6. Segments

Orthopaedics

Expected Growth: 4.5%

Sports Medicine & Ear, Nose and Throat

Expected Growth: 4.2%

Advanced Wound Management

Expected Growth: 4.8%

7. Detailed Products

Hip Implants

Knee Implants

Sports Medicine Joint Repair

Arthroscopy Enabling Technologies

Trauma and Extremities

Advanced Wound Management

Ostomy Care

8. Smith & Nephew plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Smith & Nephew plc passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

12.65$

Current Price

12.65$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA