NEW YORK ( TheStreet) – Shares of U.K. medical-device maker Smith & Nephew (SNN) - Get Report were down 1% on Friday, a day after the company posted a 7% increase fourth-quarter profit and forecast higher revenue and profit margins for this year. But achieving those goals won't be easy, which makes the stock risky.

In the fourth quarter, Smith & Nephew's revenue was flat in the U.S., suggesting that the company is lagging some of its larger rivals such as Johnson & Johnson (JNJ) - Get Report , whose U.S. revenue rose by 7.4% in its most recent quarter.

Smith & Nephew also competes with Zimmer Holdings (ZMH) and Stryker (SYK) - Get Report , both of which are larger and have gained market share in areas such as orthopedic implants, an important market for Smith & Nephew.

To win market share, Smith & Nephew is looking to disrupt the medical-device industry with a sales model called Syncera. Smith & Nephew says the program will save hospitals 40% to 50% in hip and knee replacements. But the hospitals must first sign multiyear contracts to earn the discounts Smith & Nephew is offering. When the program was launched last summer, Smith & Nephew projected Syncera would attain 5% to 10% market share in U.S. hospitals.

On Thursday's earnings call, however, Smith & Nephew CEO Oliver Bohuon wouldn't give a sales estimate for Syncera, and without a clearer indication of how Syncera will play out, investors should avoid the company's American depositary receipts, which on Friday afternoon traded at $36.30, down 41 cents, on the New York Stock Exchange.

TheStreet Ratings team rates SMITH & NEPHEW PLC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SMITH & NEPHEW PLC (SNN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

You can view the full analysis from the report here: SNN Ratings Report

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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