Wright Medical Is Headed For Double-Digit Growth, Stifel Says In Bullish Initiation

Medical device company Wright Medical Group NV WMGI is likely to return to sustainable double-digit growth in the coming quarters, according to Stifel.

The Analyst

Analyst Mathew Blackman initiated coverage of Wright Medical with a Buy rating and $34 price target.

The Thesis

Wright Medical is a uniquely positioned medtech asset with a leadership position in surgical repair of upper and lower extremities, two of the fastest-growing segments in the medical device industry end markets, Blackman said in the initiation note. 

The analyst values the global extremity market at about $8 billion, with the U.S. boasting a $3-billion annual market opportunity and growing in a high-single-digit range.

Wright stands out in the mid-cap medtech space due to its growth and margin profile, market leadership and significant domestic salesforce scale, Blackman said. 

The company's gross margin is trending at 70-percent-plus, and it has a clear pathway to a 20-percent EBITDA margin, the analyst said. 

"At 4.1x our 2019 sales projection, WMGI shares trade at a roughly 15-percent discount to comparable growth and profitability peers, suggesting the opportunity for positive multiple re-rating."

Stifel said the improvement seen in Wright's first-half results vouches for a return to double-digit growth. The performance was driven by stability, innovation and the securing of FDA approval for the AUGMENT injectable, Blackman said. 

The Price Action

Wright Medical shares have advanced about 24 percent year-to-date.

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