In many ways New Zealand-based medical device company Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) can seem like the forgotten child, stuck in the shadow of its bigger rival ResMed Inc. (CHESS) (ASX: RMD). This scenario is not on account of quality mind you, just market capitalisation and investor coverage.
When it comes to medical device products F&P operates in two key segments that are experiencing strong growth and enjoy high margins. In the OSA segment, Fisher & Paykel competes with ResMed.
1) Respiratory and Acute Care – this segment provides heating humidifier and respiratory care systems which improve patient care when treated for a range of medical conditions. Primarily these products are found within intensive care units at hospitals.
2) Obstructive Sleep Apnea (OSA) – is a fast growing and expanding segment as more doctors become aware of and patients are diagnosed for treatment. The growth opportunities in this segment are particularly appealing and explain why ResMed is expanding so aggressively in this area.
With F&P scheduled to report its full year results for the year ending 31 March on the 23rd of May, investors should be doing their homework now before the results are released. Judging by management's guidance and its interim result F&P will report a very strong full year result.
At the half year, F&P reported revenue growth of 14% to NZ$304 million and a 34% jump in profits to a record NZ$44.5 million. Based on management's guidance, shareholders can expect the company to earn revenues between NZ$610 million and NZ$625 million for the full year, with profits in the range of NZ$90 million to NZ$95 million.
Achieving these results would represent solid growth and implies earning per share of approximately NZ 16 cents on a diluted basis. At its current share price this equates to a price-to-earnings ratio of 26.8, a premium rating but one that would appear justified given the growth rate.
