This blue-chip FTSE stock fell 12.5% ​​on the day. Is it time to consider buying?

FTSE 100 health stock Smith & Nephew (LSE: SN.) I’ve had a bad week. On Thursday (October 31), it was down a whopping 12.5%.

Is this a good investment opportunity for long-term investors to consider? Let’s take a look.

Lots of energy

I hold shares of Smith & Nephew in my portfolio. Given that the company is focused on hip and knee replacement technology, I’ve always thought that it has bags of potential for long-term investment in the world’s aging population.

It has been a very frustrating stock to own. The coronavirus pandemic hit the company hard as many surgical procedures were postponed.

Recently, the company has been affected by the weak economy in China and the country’s Volume-Based Procurement (VBP) program – a government program aimed at reducing the cost of medical products. This slowed overall growth as the group was able to gain exposure to the second largest economy in the world.

Low guidance for the full year

This exposure of China is one of the reasons why the stocks just fell.

On Thursday, the company posted a Q3 update with full-year guidance. And unfortunately, it was a little disappointing.

Due to the challenges in China, the company now expects full-year revenue growth of 4.5%. Previously, it was expected to grow by 5%-6%.

Given the slow rate of top-line growth, the company expects its profit margins to grow at a slower rate than previously forecast. In August, Smith & Nephew advised that the 2024 trading profit margin would be at least 18%, however, it now expects growth of up to 50 basis points from last year’s figure of 17.5%.

Opportunity to buy?

Is there an opportunity to buy after the stock price collapse?

Possibly.

I have no intention of buying any more shares myself as it is already a decent position in my portfolio.

But if I didn’t have stocks, I might be looking at stocks now.

Management continues to believe that the company is capable of generating significant growth and profitability over time. “We remain confident that our transformation into a high-growth company, with the ability to drive the workforce to the bottom line, is on the right track.,” said CEO Deepak Nath in the Q3 update.

And the stock is trading at an attractive price today. Currently, the consensus earnings forecast for 2025 is $1.10 (reporting in US dollars). Let’s say the team actually makes $1 in profit next year. In this case, the price-to-earnings (P/E) ratio is only about 12.4 at today’s share price, which is very low for a healthcare company.

Add in the fact that there’s a 3% dividend yield on offer now, and there’s a lot to like.

Of course, China remains the most vulnerable here in the short term. For the company to do well, it needs the economy to improve and the VBP program to be profitable.

Taking a long-term view, however, I continue to believe that this stock has the potential to generate attractive returns, outperforming the FTSE.