Smith & Nephew (LSE:SN.) - Share price, News & Analysis

Q: What is the Fair Price of SN. when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

SN. (£11.65) is trading below our estimate of [[fair value]] (£18.4)

SN. fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	3/6
Past Performance	3/6
Financial Health	5/6
Dividends	5/6

SN. Stock Overview

Smith & Nephew plc, together with its subsidiaries, develops, manufactures, markets, and sells medical devices worldwide.

Rewards

Trading at 36.7% below our estimate of its fair value

Earnings are forecast to grow 14.27% per year

Pays a reliable dividend of 2.62%

Risk Analysis

No risks detected for SN. from our risk checks.

Smith & Nephew Competitors

ConvaTec Group

LSE:CTEC

UK£4.6b

EKF Diagnostics Holdings

AIM:EKF

UK£150.1m

Mediclinic International

LSE:MDC

UK£3.4b

Inspiration Healthcare Group

AIM:IHC

UK£66.4m

Price History & Performance

Summary of all time highs, changes and price drops for Smith & Nephew
Historical stock prices
Current Share Price	UK£11.65
52 Week High	UK£16.02
52 Week Low	UK£11.08
Beta	0.38
1 Month Change	-10.15%
3 Month Change	-5.98%
1 Year Change	-25.28%
3 Year Change	-32.69%
5 Year Change	-10.90%
Change since IPO	621.80%

Recent News & Updates

Jun 26

Smith & Nephew plc's (LON:SN.) Intrinsic Value Is Potentially 58% Above Its Share Price

How far off is Smith & Nephew plc ( LON:SN. ) from its intrinsic value? Using the most recent financial data, we'll...

Shareholder Returns

	SN.	GB Medical Equipment	GB Market
7D	2.1%	2.0%	1.8%
1Y	-25.3%	-22.5%	-7.3%

Return vs Industry: SN. underperformed the UK Medical Equipment industry which returned -23% over the past year.

Return vs Market: SN. underperformed the UK Market which returned -8.6% over the past year.

Price Volatility

Is SN.'s price volatile compared to industry and market?
SN. volatility
SN. Average Weekly Movement	3.8%
Medical Equipment Industry Average Movement	5.5%
Market Average Movement	5.5%
10% most volatile stocks in GB Market	10.8%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: SN. is less volatile than 75% of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: SN.'s weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1856	18,369	Deepak Nath	https://www.smith-nephew.com

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.

Smith & Nephew Fundamentals Summary

How do Smith & Nephew's earnings and revenue compare to its market cap?
SN. fundamental statistics
Market Cap	US$12.37b
Earnings (TTM)	US$524.00m
Revenue (TTM)	US$5.21b

23.6x

P/E Ratio

2.4x

P/S Ratio

Is SN. overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
SN. income statement (TTM)
Revenue	US$5.21b
Cost of Revenue	US$1.51b
Gross Profit	US$3.70b
Other Expenses	US$3.17b
Earnings	US$524.00m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Jul 28, 2022

Earnings per share (EPS)	0.60
Gross Margin	70.95%
Net Profit Margin	10.05%
Debt/Equity Ratio	56.4%

How did SN. perform over the long term?

See historical performance and comparison

Dividends

2.6%

Current Dividend Yield

63%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is SN. undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for SN.?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for SN.. This is calculated by dividing SN.'s market cap by their current preferred multiple.
What is SN.'s n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$12.37b

SN. key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	2.7x
Enterprise Value/EBITDA	12.1x
PEG Ratio	1.7x

Price to Earnings Ratio vs Peers

How does SN.'s PE Ratio compare to its peers?

SN. PE Ratio vs Peers

The above table shows the PE ratio for SN. vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	24.8x
CTEC ConvaTec Group	48.6x	21.1%	UK£4.6b
EKF EKF Diagnostics Holdings	9.5x	-9.9%	UK£150.1m
MDC Mediclinic International	22.6x	13.3%	UK£3.4b
IHC Inspiration Healthcare Group	18.5x	11.5%	UK£66.4m
SN. Smith & Nephew	23.8x	14.3%	UK£10.2b

Forward PE

Price-To-Earnings vs Peers: SN. is good value based on its Price-To-Earnings Ratio (23.8x) compared to the peer average (24.6x).

Price to Earnings Ratio vs Industry

How does SN.'s PE Ratio compare vs other companies in the European Medical Equipment Industry?

Price-To-Earnings vs Industry: SN. is expensive based on its Price-To-Earnings Ratio (23.8x) compared to the UK Medical Equipment industry average (21.1x)

Price to Earnings Ratio vs Fair Ratio

What is SN.'s PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

SN. PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	23.6x
Fair PE Ratio	39.1x

Price-To-Earnings vs Fair Ratio: SN. is good value based on its Price-To-Earnings Ratio (23.8x) compared to the estimated Fair Price-To-Earnings Ratio (39.2x).

Share Price vs Fair Value

What is the Fair Price of SN. when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: SN. (£11.65) is trading below our estimate of fair value (£18.4)

Significantly Below Fair Value: SN. is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: SN. is poor value based on its PEG Ratio (1.7x)

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Future Growth

How is Smith & Nephew forecast to perform in the next 1 to 3 years based on estimates from 12 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

14.3%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: SN.'s forecast earnings growth (14.3% per year) is above the savings rate (0.9%).

Earnings vs Market: SN.'s earnings (14.3% per year) are forecast to grow faster than the UK market (11% per year).

High Growth Earnings: SN.'s earnings are forecast to grow, but not significantly.

Revenue vs Market: SN.'s revenue (4.5% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: SN.'s revenue (4.5% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: SN.'s Return on Equity is forecast to be low in 3 years time (15.5%).

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Past Performance

How has Smith & Nephew performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-12.6%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: SN. has high quality earnings.

Growing Profit Margin: SN.'s current net profit margins (10.1%) are higher than last year (9.8%).

Past Earnings Growth Analysis

Earnings Trend: SN.'s earnings have declined by 12.6% per year over the past 5 years.

Accelerating Growth: SN.'s earnings growth over the past year (17%) exceeds its 5-year average (-12.6% per year).

Earnings vs Industry: SN. earnings growth over the past year (17%) underperformed the Medical Equipment industry 22.3%.

Return on Equity

High ROE: SN.'s Return on Equity (9.4%) is considered low.

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Financial Health

How is Smith & Nephew's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: SN.'s short term assets ($4.4B) exceed its short term liabilities ($2.1B).

Long Term Liabilities: SN.'s short term assets ($4.4B) exceed its long term liabilities ($3.2B).

Debt to Equity History and Analysis

Debt Level: SN.'s net debt to equity ratio (33.3%) is considered satisfactory.

Reducing Debt: SN.'s debt to equity ratio has increased from 41.5% to 56.4% over the past 5 years.

Debt Coverage: SN.'s debt is well covered by operating cash flow (27.9%).

Interest Coverage: SN.'s interest payments on its debt are well covered by EBIT (9.6x coverage).

Balance Sheet

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Dividend

What is Smith & Nephew current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.64%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: SN.'s dividend (2.62%) is higher than the bottom 25% of dividend payers in the UK market (1.88%).

High Dividend: SN.'s dividend (2.62%) is low compared to the top 25% of dividend payers in the UK market (5.18%).

Stability and Growth of Payments

Stable Dividend: SN.'s dividends per share have been stable in the past 10 years.

Growing Dividend: SN.'s dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (62.8%), SN.'s dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (69.7%), SN.'s dividend payments are covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

3.2yrs

Average management tenure

CEO

Deepak Nath (48 yo)

0.17

Tenure

Dr. Deepak S. Nath, Ph.D. served as Head of Diagnostics at Siemens Healthineers AG since 2021 until 2022 and served as its President of Laboratory Diagnostics since 2018 until 2021 where he led a major pro...

Leadership Team

Experienced Management: SN.'s management team is considered experienced (3.2 years average tenure).

Board Members

Experienced Board: SN.'s board of directors are not considered experienced ( 2.1 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/28 00:00
End of Day Share Price	2022/06/28 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31