Is Cochlear a buy?

Cochlear (ASX: COH) is the global leader in the provision of hearing implant devices, and sales growth prospects look solid. It has a large global presence, with direct operations in over 20 countries and products sold in over 100 countries.

Fluctuating foreign exchange rates have impacted the business, and the Australian dollar’s recent fall has seen the share price recover from a profit downgrade at the end of June.

Cochlear’s main opportunity for sustainable growth comes through the large unmet clinical markets for its products across the world. Emerging markets, particularly two of the world’s most populous countries, China and India, remain a focus.

The profit premium here is lower than in its main market, the United States, but the potential for sales growth is greater. Furthermore, the company’s competitive advantage — having the best technology going — has allowed it to dominate the global market in recent years.

To maintain or even increase this advantage, the business continues to invest heavily in research and development. One such product developed as a result of this investment is its latest implant device, the Nucleus N6. Recently launched after having been in development for over six years, the success of this device could be crucial to the company’s 2014 performance.

The N6 is said to be the start of a new range of products to be launched in the coming year, based on the latest sound processing technologies.

The company relies on investment in new technologies and innovations to translate into greater profits and sales. At today’s prices, a P/E ratio over 26 is demanding, however a dividend yield in the region of 3.8% provides some reliable income.

Foolish takeaway

The fundamentals for the business remain strong and investors will hope new technology means 2014 brings strong all-round results with it. Those bearish on the Australian dollar will also find the business of particular interest.

Looking for a few more solid investment ideas? The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” 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

Motley Fool contributor Tom Richardson owns shares in Cochlear.

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.