It was a good month for the FTSE 100 in April. The UK’s blue-chip index rose by 3.1% to reach 7,870 points. Across the pond, the US S&P 500 managed a 1.5% gain.
Among the Footsie’s top performers last month was medical equipment manufacturing company Smith & Nephew (LSE:SN.) Its share price soared by around 17.3%.
With that in mind, could now be an ideal time for me to buy some shares in anticipation of future share price appreciation?
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Director deals
One person who certainly thinks so is the incoming chair of the company, Rupert Soames.
He marked his appointment to the Smith & Nephew board by spending £117,000 on shares in the medical devices business.
Soames’ investment was made at 1,294p, representing the highest level for shares in a year.
The development comes on the back of the company’s AGM trading statement, which demonstrated better-than-expected first quarter revenues of $1.36bn.
Positive performance
Impressively, the trading update also highlighted growth across all three franchises, including an improvement in orthopaedics.
Underlying sports medicine and ENT (ear, nose and throat) revenue climbed 10%. Meanwhile advanced wound management and orthopaedics revenues rose by 7.9% and 3.9%, respectively.
Established markets revenue was up 10% as procedure volumes strengthened.
Crucially, this offset declining revenue in emerging markets, which slumped by 7.3% due to the expected impact in China from changes in how the government purchases medical supplies, as well as Covid-19.
Continuing challenges
This highlights an ongoing risk factor facing Smith & Nephew, particularly in emerging markets. Namely, the depth and longevity of the impact of Covid.
For example, government actions and other restrictive measures taken in response to future upticks in the virus could continue to cause material delays and cancellations of elective procedures, reduced procedure capacity at medical facilities and restricted access for sales representatives to medical facilities.
More broadly, persistently poor economic and financial conditions in core markets could dampen customer spending and subsequently weaken revenues.
Optimistic outlook
Nevertheless, demographic trends and widespread backlogs look set to continue to underpin demand over the long term, particularly when it comes to elective surgeries.
More importantly though, I’m a huge fan of Smith & Nephew’s plan to accelerate the delivery of its strategy for growth.
The goal is to make the FTSE 100 firm a consistently higher-growth company in the long run. And provided it can continue launching innovative new products to drive this future growth, I don’t see many reasons why this won’t be achievable.
This encapsulates what I like most about Smith & Nephew. It’s not a company willing to sit back and let the market drive its sales growth. Instead, the company proactively continues to develop and launch new products, and introduce existing products into new areas of treatment.
For this reason, I’d happily buy some Smith & Nephew shares for my portfolio and hold them for the long term. Unfortunately, I don’t have any cash to spare at the moment, so I’ll have to watch from the sidelines for now.
