Wright Medical Group (NASDAQ: WMGI) is
an orthopedic medical device company focusing on the design, manufacture and marketing of reconstructive joint devices and biologic products. Offerings include implants for major and minor joints, an injectable putty for bone defects, bone graft materials and tissue substitutes. Wright Medical serves orthopedic surgery customers in more than 60 countries. Stryker Corporation (NYSE: SYK) and Zimmer Holdings (NYSE: ZMH) are competitors.
The firm surprised the Street last week, when it reported Q1 EPS of 17 cents and revenues of $115.9 million. Analysts had been looking for 13 cents and $108.2 million. The company experienced growth across all of its major product lines. In fact, the CEO noted that it was Wright Medical's "ninth consecutive quarter of global sales growth acceleration." Management also guided Q2 EPS to 17-18 cents (15 cent consensus), Q2 revenues to $113.5-$115.5 million ($112.13M consensus), FY08 EPS to 87-91 cents (62 cent consensus) and FY08 revenues to $455-$465 million ($439.94M consensus). Leerink Swann subsequently upgraded the stock to "outperform".
WMGI shares
popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with five "strong buys", five "buys" and four "holds". Analysts estimate a 22% average annual growth rate, through the next five years. The WMGI Price to Sales ratio (2.62), Price to Book ratio (2.65), Sales Growth rate (22.91%) and EPS Growth rate (88.89%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past fifty-two weeks, the stock has traded between $21.06 and $31.80. A stop-loss of $24.35 looks good here. Note that the firm will be presenting at the Morgan Stanley 2008 Global Healthcare Unplugged Conference (May 2nd).
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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