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Goldman Sachs downgrades Smith & Nephew after recent outperformance

Last updated: 04:40 22 Jan 2014 EST, First published: 05:40 22 Jan 2014 EST

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Global medical devices group Smith & Nephew (LON:SN.) has been downgraded to 'sell' by heavyweight broker Goldman Sachs.

It follows the stock's recent outperformance against the European medical technology sector by 670 basis points (6.7 percentage points) in the last three months and compared to US peers, says the broker.

It believes the firm's performance is down to expected recovery in the orthopaedics market and the potential for further merger and acquisition (M&A) activity.

Analyst Veronika Dubajova notes the firm now trades on a multiple of 15.6 times price-earnings on 2015 estimates.

That compares to 14.1 times at US peers Stryker and Zimmer, in spite of a comparable growth outlook.

"We continue to view SN.L as less well positioned within European Medtech given the company’s exposure to the slower-growth ortho and wound markets and relatively low market share," says Dubajova.

Goldman's 12-month P/E-based price target of 720p implies 18% downside, it added.

Smith & Nephew shares are up 0.68% to 887.5p.

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