Cochlear Limited updates market: Is it still a bargain?

Cochlear Limited (ASX:COH) is on track to meeting its internal targets and boosting profits over its 2014 financial year.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Cochlear Limited (ASX: COH) is a global leader in the development of devices for hearing loss.

Cochlear implants, bone conduction implants and wireless accessories are the trusted hearing devices for more than 250,000 people throughout the world.

Successful investment in research and development initiatives has led to countless product rollouts across the globe, each time increasing sales revenues and profits for shareholders. Cochlear shares have achieved an average annual total return (share price gains plus dividends) of 11.6% over the past decade, despite a significant product recall in late 2011.

However, although Cochlear continues to fire on all cylinders in local and global markets, the future outlook for the company is promising. Sales growth in the Americas and EMEA (Europe, Middle East and Africa) regions account for an overwhelming 83% of sales. Meanwhile, just 17% of group revenue comes from Asia Pacific, a region with enormous potential.

Much like an iPhone from Apple, consumers in emerging markets have proven their willingness to pay the highest prices for the best products, and I highly doubt their desire to purchase quality healthcare products will be any different. China's healthcare spending alone is tipped to reach $US1 trillion in the next six years, as its growing middle class population and consumption spend continues to balloon.

According to data from the World Health Organisation, deafness and hearing loss affects 360 million people globally with one in three over 65 affected. Cochlear estimates the penetration of this enormous market is less than 5%.

Is it a bargain?

Today, Cochlear shares traded as much as 1% higher, at $85.35, following its AGM presentation in Sydney. The company said its first quarter performance was on track with internal forecasts. It confirmed its full year net profit guidance of between $165 million and $175 million.

By my calculations that places Cochlear shares on a forward price-earnings ratio of 28x, which I believe is reasonable for a long-term growth stock of its calibre. In my opinion, along with its peers such as ResMed Inc. (CHESS) (ASX: RMD) and CSL Limited (ASX: CSL), Cochlear is a worthy long-term investment at today's prices.

Motley Fool contributor Owen Raskiewicz owns shares of Cochlear Ltd., CSL Ltd and ResMed Inc. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »