Shares of Virtus Health Ltd (ASX: VRT) have come under enormous selling pressure over the last month or so, plummeting more than 31% since late May on the back of a disappointing trading update. It's also down more than 36% over the last year, heavily underperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) during that time.
In February, the company forecast net profit after tax (NPAT) growth in the "low-to-mid-teens" before non-recurring items of $2.1 million. It has since realised that those targets were ambitious and now expects "low-to-mid-single digit percentage growth" before non-recurring items of $2.3 million.
Based on the wording used, that could imply growth in NPAT of say 4%, compared to 14%, which is a substantial difference. The company reported NPAT of $30.96 million in 2014, so NPAT could come in at around $32.2 million compared to a previous estimate of around $35.3 million (note that these are my own estimates).
Virtus Health is Australia's largest provider of In Vitro Fertilisation, or IVF as it is more commonly known. The reason behind the recent downgrade however, is that its market dominance appears to be under duress after the company said it has lost 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.
Personally, I think now could be a reasonable time to pick up shares in the business. The shares are sitting within 9 cents of a record low at $5.34 per unit while demand for IVF is expected to grow strongly over the coming years and decades.
In saying that however, investors also need to be wary of further downgrades while they should also watch for any further loss in market share. Should Virtus Health prove unable to regain its dominance in those markets, it could certainly be a warning sign to move your funds elsewhere.