One of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today has been Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) with a 6% drop to $7.84.
It would appear as though today's decline is the result of a downgrade to a hold rating from analysts at Deutsche Bank.
A research note out of the investment bank reveals that despite yesterday's record half-year result from the leading provider of respiratory care medical devices, its analysts have concerns over the ongoing legal battle with rival ResMed Inc. (CHESS) (ASX: RMD).
In August Fisher & Paykel Healthcare alleged that a number of ResMed products infringe on its patents. ResMed responded by filing their own complaint of patent infringement against Fisher & Paykel Healthcare.
Fisher & Paykel responded by stating that:
"Fisher & Paykel Healthcare has been providing unique solutions for patients suffering from OSA for more than 20 years and we take pride in our proprietary technology, having built a significant patent portfolio over the past 20 years. We also respect the valid intellectual property rights of others, and we are confident in our position with respect to ResMed's patents given the rigorous clearance we conduct before any product is released to market."
Neither company has updated the market since, but it would seem as though Deutsche Bank isn't overly confident in the outcome of the court proceedings.
But another investment bank doesn't have any concerns. Analysts at Citi have labelled Fisher & Paykel Healthcare a buy today after its half-year results outperformed their expectations.
For the first half of FY 2017 the company reported a 12% increase in operating revenue to NZ$425.2 million. The bottom line performance was even stronger with net profit after tax up 26% to a record NZ$78.2 million.
In light of this management upgraded its full year earnings guidance to be in the range of NZ$165 million to NZ$170 million. Up between 15% and 19.5% on last year's NZ$143.4 million.
At 25x estimated FY 2017's earnings Fisher & Paykel Healthcare could be great value now considering its performance and the strong growth potential for the obstructive sleep apnea market.
However, investors may want to err on the side of caution and wait for the patent disputes to resolve before investing.
