5 Reasons Why You Should Offload Wright Medical Stock Now

Wright Medical Group N.V. WMGI has been having a dismal run on the bourses of late. Over the last three months, the stock has lost 12.3%, underperforming the broader industry’s gain of 9%. The current level also lags the S&P 500’s return of 8.9%.

The company saw negative earnings per share growth of 238.6% over the last five years as compared to 2.8% for the S&P 500 index and 9% for the broader industry.

The company has an unimpressive Growth Style Score of F. Our Growth Style Score highlights all the vital metrics of a company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) offer the best investment opportunities. The stock has a VGM Score of F.

 

 

Here we take a look at five major issues plaguing Wright Medical at the moment:

Guidance Dull

Wright Medical expects 2017 net sales in the band of $740 million to $745 million, down from the earlier $755 million to $765 million. This includes negative impact from foreign currency exchange of approximately 1%.

Negative Estimate Revision Trend

The estimate revision trend for Wright Medical has been dismal. For the current quarter, one analyst moved south compared with no movement in the opposite direction over the last month. As a result, the Zacks Consensus Estimate for full-year earnings fell 20% to 4 cents.The stock has a Zacks Rank #4 (Sell), signifying probabilities of underperformance in the near term.

Foreign Currency Headwinds

Wright Medical derives a significant part of its total revenues from international operations, which are affected by fluctuations in foreign currency exchange rates.

Back Order Issues

Products of Wright Medical are usually marketed internationally through a combination of subsidiaries and distributors. In Europe, Asia, Africa and Latin America, the company primarily relies on distributors for sales. However, distribution of products in some of these markets has been troublesome due to the presence of different distributor levels. These problems are eventually resulting in a significant amount of back orders, which is a major headwind.

Pricing Pressure

Wright Medical continues to face flat pricing due to price discounting in larger accounts, limited product offerings and international price cuts. The advent of group purchasing organizations is also keeping prices under pressure.

Key Picks

A few better-ranked stocks in the broader medical sector are Amedisys, Inc. AMED, Bio-Rad Laboratories, Inc. BIO and Intuitive Surgical, Inc. ISRG.

Bio-Rad Laboratories sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.The company has a long-term expected earnings growth rate of 25%.

Amedisys has a long-term expected earnings growth rate of 18.5%. The stock carries a Zacks Rank #2.

Intuitive Surgical has a long-term expected earnings growth rate of 9.6%. The stock has a Zacks Rank #2.

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Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report
 
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