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what it is
Smith & Nephew sells artificial joints, sports surgery tools, and advanced wound care products to hospitals worldwide.
how it gets paid
Last year Smith & Nephew made $6.2B in revenue. Orthopaedics was the main engine at $2.48B, or 40% of sales.
why it's growing
Revenue grew 6.1% last year. Sales rose 6.1% vs. prior year, right in line with the recovery story.
what just happened
Smith & Nephew reported $6.2B in annual revenue, slightly above the $6.15B sales outlook.
At a glance
B++ balance sheet — above average — nothing keeping you up at night
50/100 earnings predictability — expect surprises
30.0x trailing p/e — priced about right
2.4% dividend yield — cash in your pocket every quarter
9.5% return on capital — modest vs a 30x multiple
xvary composite: 58/100 — below average
What they do
Smith & Nephew sells artificial joints, sports surgery tools, and advanced wound care products to hospitals worldwide.
Hospitals do not swap implant systems casually. Your surgeon training, hospital inventory, and operating room habits get built around one platform, and Smith & Nephew still generated $6.2 billion of revenue in 2025. That repeat use supports a 68.0% gross margin (gross margin → money left after making the product → the products still have pricing power).
How they make money
$6.2B
annual revenue · their business grew +6.1% last year
Orthopaedics
$2.48B
Sports Medicine & ENT
$1.92B
Advanced Wound Management
$1.80B
The products that matter
joint reconstruction devices
Orthopaedics
$2.48B · 40% of revenue
It is the largest segment at $2.48B on the segment table, which means procedure volumes and surgeon adoption here still set the tone for the whole company.
largest segment
arthroscopy and ent tools
Sports Medicine & ENT
$1.9B · 31% of revenue
This $1.9B business is nearly one-third of sales, so if you are looking for a second engine beyond hips and knees, this is it.
31% of revenue
wound care products
Advanced Wound Management
$1.8B · 29% of revenue
At $1.8B, wound care is too large to treat as a side business. It gives you diversification, but it also adds another market where pricing and reimbursement matter.
diversifier
Key numbers
24.5%
operating margin
Operating margin → profit after running the business → every $100 in sales leaves $24.50 before interest and taxes. That is solid, but the stock price already expects more.
30.0x
trailing p/e
P/E → price versus last year's profit → you are paying $30 for every $1 SNN earned over the last year. That is expensive next to 9.5% return on capital.
9.5%
return on capital
Return on capital → profit earned on the money tied up in the business → management is not squeezing elite returns from its assets yet.
2.4%
dividend yield
Yield → cash paid to shareholders each year at today's price → you get some waiting payment, but not enough to rescue a bad entry price.
Financial health
B++
strength
- balance sheet grade B++ — above average financial health
- risk rank 3 — safer than 50% of stocks
- price stability 75 / 100
- long-term debt $3.3B (18% of capital)
- net profit margin 10.5% — keeps 10 cents of every dollar in revenue
- return on equity 12% — $0.12 profit for every $1 investors have put in
B++ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in SNN 3 years ago → it's now worth $12,910.
The index would have given you $14,770.
source: institutional data · total return
What just happened
beat estimates
Smith & Nephew reported $6.2B in annual revenue, slightly above the $6.15B sales outlook.
Sales rose 6.1% vs. prior year, right in line with the recovery story. Gross margin was 68.0%, which tells you the products still have pricing power while cost cuts do the heavier lifting below the line.
$6.2B
revenue (FY)
$1.10
eps (FY)
68.0%
gross margin (FY)
the number that mattered
The key number was $6.2B in revenue because it topped the $6.15B sales outlook. That keeps the recovery story alive while investors wait for margins to do more of the work.
-
we expect smith & nephew likely delivered solid results in 2025.
-
our full-year revenue estimate of $6.15 billion suggests a 6% increase vs. prior year.all of the company's operating segments, orthopaedics, sports medicine & ent (ear, nose and throat), and advanced wound management were on track to register mid-single-digit advances.
-
on the bottom line, we are calling for a 22% increase as some cost-cutting measures have been helping boost margins.
-
the near term is shaping up nicely.
-
the orthopaedics segment is likely to continue the recent momentum it has been generating.the hip replacement business has been picking up in the u.s., thanks to healthy demand for the catalystem primary hip system.
source: company earnings report, 2026
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What could go wrong
the top threat here is procedure-volume weakness in Orthopaedics. That is the biggest segment at $2.5B, so a slowdown there hits the headline numbers fast.
high
orthopaedics slowdown
Orthopaedics is a $2.5B segment and 40% of revenue. If hip and knee procedure demand softens or market share slips, the whole company feels it.
exposes up to $2.5B of revenue
high
execution risk across three segments
This is not a one-product story. Smith & Nephew has to deliver in orthopaedics, sports medicine, ENT, and wound care at the same time. Balanced revenue helps, but it also multiplies execution points.
touches the full $6.2B revenue base
med
wound care pricing and reimbursement pressure
Advanced Wound Management generates $1.8B. That business depends on hospitals and care settings keeping reimbursement economics attractive enough to support product adoption.
puts $1.8B of revenue under pressure
med
valuation outrunning operating quality
The stock trades at 30.0x trailing earnings while return on capital is 9.5%. If the business stays merely okay, the multiple has less reason to stay generous.
multiple compression could matter more than revenue growth
The key issue is not balance-sheet stress. It is that all $6.2B of revenue still has to translate into better returns than 9.5% on capital for this valuation to hold.
source: institutional data · regulatory filings · risk analysis
Pay attention to
metric
return on capital
9.5% is the quiet problem. If that number does not move up, 30.0x earnings starts looking expensive rather than patient.
calendar
next earnings report
You want the first read on whether revenue growth stays above the recent 6.1% pace and whether margins actually convert that growth into better returns.
trend
institutional flow
Three straight quarters of net buying sounds better than it looks. The latest gap was 120 buyers versus 116 sellers. Watch whether that spread widens or disappears.
risk
orthopaedics demand
At $2.5B and 40% of revenue, this segment still carries the most weight. If procedure growth softens, the diversification story will not save the headline number.
Analyst rankings
earnings predictability
50 / 100
This sits right in the middle. In human-speak, analysts do not see this as a clean, clockwork earnings story.
risk rank
3
That translates to average safety. You are not buying a bunker stock, but you are not buying a train wreck either.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 120 buyers vs. 116 sellers in 3q2025. total institutional holdings: 32.2M shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$27
$48
$34
current price
$38
target midpoint · +13% from current · 3-5yr high: $70 (+105% · 21% ann'l return)
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