New Zealand-based Fisher & Paykel Healthcare (ASX: FPH) has reported a 34% increase in first-half profits to NZ$44.5 million on the back of operating revenues that grew 14% to NZ$303.9 million.
The revenue growth was helped along by an increasing number of clinicians and homecare providers administering the products, as well as an extension of the range of products and the applications for the suite of products. According to the results release, both divisions, namely the respiratory and acute care division and obstructive sleep apnea division produced an impressive 15% growth in revenues.
During the half, the firm undertook capital expenditure of $18.4 million, which included increased manufacturing capacity. The benefits flowing from efficiencies in both the New Zealand and the Mexican production facilities have helped Fisher & Paykel expand its gross margin by 3.57% compared with the prior corresponding period.
Importantly, the outlook for the full year is expected to continue at robust growth rates much like the first half. Management provided guidance for net profit after tax (NPAT) to be in the range of NZ$90 million to NZ$95 million with revenues between NZ$610 million and NZ$625 million.
Fisher & Paykel competes with ResMed (ASX: RMD) in many of its product categories, which makes Fisher & Paykel's results almost as closely watched by ResMed's shareholders as they are by Fisher & Paykel's shareholders. Thus the expectation of strong growth through the second half of the year should provide confidence to ResMed's shareholders too about the robust nature of the respiratory industry.
Foolish takeaway
For investors weighing whether to purchase shares in Fisher & Paykel, the company's guidance (converted into Australian dollars at current exchange rates) suggests the stock is trading on an approximate forward price-to-earnings ratio of 22.5 times. Given the outlook for solid global revenue growth coupled with the impressive margin expansion, this doesn't appear to be an excessive multiple to pay for a high quality business.
