Value & Growth Stocks
Value stocks generally trade lower relative to their fundamental value. Alternatively, despite strong fundamentals in the value stocks, these stocks may trade on a discount to the implied value.
There could be many reasons for the discount ranging from a company-specific problem or sector-wide disruption. It is believed that the market would realise the potential of the stock at some period, resulting in higher appreciation.
The legendary investor Benjamin Graham popularised value investing. Value investors usually emphasise on the fundamentals of the company, which could be the balance sheet statistics, including revenue, dividends, debt, earnings, book value or working capital.
Growth stocks have some attractive characteristics such as above-average growth numbers, and top high growth stocks usually trading in higher PE multiples. These stocks depict relatively higher earnings, higher revenue along with the growth.
Growth stocks tend to pursue high growth activities, resulting in relatively higher expenditure to pursue growth. As a result, these stocks generate relatively lower earnings and lower dividends.
Let’s discuss some stocks from the Healthcare industry listed on ASX:
Nanosonics Limited (ASX: NAN)
Disinfection technology developer, Nanosonics has developed a major innovation in the high-level disinfection for ultrasound probes.
Its proprietary technology is being introduced around the world, changing the course of infection protection practices that are applied and implied while addressing the issue associated with traditional practices.
The company has been successfully investing in the R&D programs, management, manufacturing, customer engagement & trade partners, which is also depicted by the launch of its next-generation trophon®2 and the growth in its installed base.
In the meantime, its R&D team continue to develop new solutions for future growth and expansion. Its innovation & export prowess is also recognised by the leading media giants in the country.
As per the ESG metrics, the company believes that the shareholder value is also driven by giving back to the community. It supports and encourages employees to undertake charity events, fundraising activities via providing entry fees, raffle prizes, and often matching fundraising amounts are raised.
FY 20 Priorities
According to the Annual Report, the company would focus on growing its installed base in North America and expects that adoption in FY20 would be similar to FY19. It intends to increase sales infrastructure in Europe to propel the increasing growth in trophon adoption, as the fundamentals has seen improvements in the UK, Germany & France.
Although there are other priorities of the company as well, however, the company expects to invest in growth prospects, resulting in expected operating expense of approx. $67 million that comprises of $15 million in R&D.
In North America, the company has updated its distribution agreement with GE Healthcare, changing it to a Capital Reseller model. It is expected that this would increase the company sales & margin with full impact anticipated in the second half of FY20.
On 14 October 2019, NAN was trading at $6.45, down by 0.155% (at AEST 1:05 PM). In the past three months, the stock has delivered a return of +23.28%. On the YTD basis, the stock’s return is up by 132.37%.
ResMed Inc. (ASX: RMD)
ResMed Inc. is an innovative solution provider to keep humans out of hospital. It leverages its cloud-related medical tools to cure patients suffering from sleep apnea, and other chronic ailments.
In the year ended 30 June 2019, the company invested USD 180.7 million in R&D activities, representing 6.9% of the net revenues with a focus on development, commercialisation of new, innovative products that improve patient outcomes and develop the status quo in the standard of care.
Some new products released in the year included AirFit F30 – a full face mask with minimal-contact cushion, AirFit N30i – a top-of-head connected nasal, and P30i- a pillow mask. As a result of multiple acquisitions, the company’s capability scaled up to provide out-of-hospital software platforms, which support the professional caretakers in the health care industry.
These acquisitions included Brightree, HEALTHCAREfirst & MatrixCare, and the platforms by this segment comprise the SaaS business of the company. It includes cloud-based remote monitoring systems, therapy management systems with a robust pipeline that would leverage the growth prospects of the company.
Revenue Reached USD 2.6 billion
In FY 2019, the net revenue of the company reached USD 2,606.6 million, depicting an increase of 11% over the previous year. The gross profit of the company increased to USD 1,536.6 million for the period, up from USD 1,362.2 million in the previous year, increasing 13%. Consequently, the net income of the company for the period was USD 404.6 million compared to USD 315.6 million in the previous year.
On 14 October 2019, RMD was trading at $19.095, down by 1.062% (at AEST 1: 17 PM). In the past three months, the stock has delivered a return of +8.24%. On the YTD basis, the stock’s return is up by 20.32%.
PolyNovo Limited (ASX: PNV)
Last month, the company appointed Senior VP Americas, and Mr Ed Graubart joined the company as Senior Vice President of PolyNovo North America LLC. It was reported that Mr Graubart would be responsible for sales & marketing function for the US business.
It was said that the appointment would improve the company’s ability to scale up business in the Americas by improving sales & marketing. Mr Graubart has extensive experience of over 29 years in the orthopaedic medical industry.
The company considers the appointment essential for long-term capability development in the US. Therefore, the company had issued 1 million share options with a strike price of $1.55 for the next five years.
On 13 September 2019, the company reported on an important trial. Accordingly, it was said that the company held a meeting with the US FDA related to its full thickness burn study. The official body had acknowledged the potential of NovoSorb BTM for the burn population.
Further, the company’s clinical unit was amending the protocol design to integrate FDA input and has scheduled to submit to the FDA in December this year. Therefore, the patient recruitment is scheduled for the last quarter of FY 20.
It was also reported that BARDA also supported the process, and the company would announce the protocol & budget for the trial in the third quarter of FY 20. The fruitful conclusion of the trial would result in the US FDA application for PMA’s nod of NovoSorb BTM to be utilised in curing the people suffering from the full-thickness burns in the US region.
In the year ended 30 June 2019, the company recorded revenue from customer contracts of $13.34 million compared to $5.71 million in the previous year. Total revenue of the company was $14.38 million compared to $6.82 million in the previous year.
Despite the increase in the major operating costs, except research & development, the company was able to lower its losses to $3.18 million for the period compared to $5.98 million in the previous year.
On 14 October 2019, PNV was trading at $2.485, slipping by 2.93% (at AEST 1:28 PM). In the past three months, the stock has delivered a return of +46.29%. On the YTD basis, the stock is has provided an excellent return of +326.67%.
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