Why you should bank on Fisher & Paykel Healthcare

Mask and respiratory device manufacturer Fisher & Paykel Healthcare (ASX: FPH) took the market by surprise yesterday, unveiling a record full-year revenue result and smashing the company’s increased profit guidance issued in February.

The company reported total revenues of NZ$556 million, up 11% in constant currency terms (ignoring the impact of currency fluctuations), and net profit after tax (NPAT) of NZ$77.1 million for the year ending 31 March, a 20% increase on the year prior.

Fisher & Paykel Healthcare is a leading company in the respiratory and healthcare industry, competing closely with products produced by Phillips Healthcare (NYSE: AEX) and Australia’s own ResMed (ASX: RMD).

The full-year results were backed up with an optimistic forecast for 2014 profit to growth between 10% and 17% from growth in the company’s higher margin products and new range of masks.

For most healthcare manufacturers, including companies like hearing aid manufacturer Cochlear (ASX: CCH), growth is driven by heavy investment in research and development to stay at the forefront of the market. Fisher & Paykel Healthcare allocated 8.2% of 2013’s operating revenue to R&D, an increase of 9%, but the investment will result in a number of new products being released in the 2014 financial year.

The company will benefit over the long-term as populations age and there is increased spending on both private and public healthcare. Another medical trend is the increasing incidence of obesity prevalent in the west. Obesity is a major cause of obstructive sleep apnea, an ailment for which FPH provide respiratory devices.

Despite it being a competitive market, FPH’s continued investment in R&D, as well as cost reductions by shifting production to lower cost countries closer to the company’s international markets will set FPH in a good position to capitalize in the foreseeable future.

Foolish takeaway

The strong profit announcement pushed FPH’s share price up 7.2% to $2.68. Shares are up 29% in the last 12 months, compared to the S&P/ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) increase of 27%. However the increase is still a long way from RMD’s price appreciation in the last 12 months of 57.8%.

In the market for high-yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool’s purpose is to help the world invest, better.  Click here now  for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Regan Pearson owns shares in FPH.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.