Australian shares have been hit hard recently but few have been punished as much as Virtus Health Ltd (ASX: VRT), which has shed a massive 22.9% from its price over the last week to trade at just $5.98 per share.
Virtus Health is Australia's largest provider of In Vitro Fertilisation, or IVF as it is more commonly known. The problem is its dominance in the market appears to be under duress after the company said it has lost market share in Queensland and Victoria, while its growth in the key New South Wales market has also been stunted by a rival offering bulk billed services.
In addition, Virtus said that volumes at its Maroubra facility in Sydney had been impacted by storm damage while start-up volumes at its new operations in Singapore had also been lower than expected.
As a result of these various issues, Virtus announced that it now expects to achieve "low-to-mid single digit percentage growth" in net profit after tax (NPAT) for the year before non-recurring items of $2.3 million. That compares to its prior guidance, provided in February, of "low-to-mid teens" growth before non-recurring items of just $2.1 million.
Should you buy?
Demand for IVF is expected to grow strongly over the coming years and decades, and Virtus Health commands one of the best positions to benefit from that trend. However, it is concerning to see volumes decline and its dominance in the market threatened by other competitors, which is something investors will need to keep a close eye on.
Given that the stock is now trading at a 33% discount to its 52-week high of $8.93, now could be a reasonable time for investors to make their move on the stock. In saying that however, there could be further downgrades in the near future which would negatively impact the stock, so some investors may want to wait until the outlook becomes clearer.