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This FTSE 100 growth stock could be a better buy than AstraZeneca plc

In terms of powerful long-term investment themes, it doesn’t get much bigger than the world’s ageing population. We’re getting older as a global population. Indeed, the World Bank believes that by 2030, the average global life expectancy will rise to 85, up from 71 in 1970. Furthermore, the National Institute on Aging estimates that the number of people aged 65 or older will grow to 16% of the global population by 2050, up from 8% now.

Demand for healthcare

It’s no secret that as we age, our demand for healthcare rises. As a result, stocks such as AstraZeneca (LSE: AZN) represent a popular way for investors to play the theme. But is AstraZeneca the best way to do this? I’m not so sure.

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Revenues at the pharma giant have been trending downwards for several years now. Indeed, after reporting revenue of $33.6bn in FY2011, last year it was just $23bn. City analysts expect a further drop this year, to $21.6bn. Furthermore, while AstraZeneca’s dividend yield of 4.2% looks attractive, I’m not convinced the current payout is sustainable. With sales falling, and dividend coverage low, future payments are far from certain, in my opinion.

So how else can investors play the ageing population/healthcare theme? One angle that looks quite compelling could be joint replacements.

Our bodies can’t cope

My grandfather recently passed away at the grand old age of 95. Amazingly, at that age, he was still quite mentally sharp. In fact, one of the last conversations I had with him was regarding the benefits of dividend stocks! However, his body, was a different matter. As a keen golfer who had enjoyed the game for over 70 years, his body was a mess. His knees, hips and shoulders had all given up on him, and he’d needed joint replacement surgery multiple times to keep functioning.

It’s a common problem. In England and Wales alone, there are approximately 160,000 hip and knee replacement procedures performed each year. Surgery techniques and technologies have come a long way in recent years, allowing more patients to consider treatment sooner and enjoy a better quality of life. Can investors capitalise on this trend? Absolutely. Take a look at FTSE 100-listed Smith & Nephew (LSE: SN).

This is a specialist in joint replacement systems for knees, hips and shoulders, and with operations all across the world, including emerging markets, it looks well-placed to benefit as the world’s population gets older and more fragile.

Revenue at the £12.3bn market cap company has been ticking up at a slow but steady rate in recent years, hitting $4.7bn last year. A Q3 trading update released this morning, revealed further progress, with revenue up 3% on both a reported and underlying basis. Growth in established markets was 1% while emerging markets growth was 9%. The company stated that it would be reviewing its cost base to further simplify and improve its operating model, and that the full-year outlook would be at the lower end of the guidance range.

Smith & Nephew looks to be a high-quality company, capable of generating strong operating margins, an excellent return on equity, and attractive dividend growth. As such, I see a great deal of long-term potential here. The shares are a little pricey on a forward P/E ratio of 20.7, however I think that valuation is justified, given the growth prospects on offer.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.