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

Medical device company Wright Medical Group NV WMGI 2.18% 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.

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