Is it time to buy Somnomed Limited and Acrux Limited?

These healthcare businesses have been attracting investment analysts’ attention.

| More on:
a woman

Sleep disorder device maker Somnomed Limited (ASX: SOM) has ambitions to become the next ResMed Inc. (CHESS) (ASX: RMD), even appearing to adopt a similar name to Australia’s most famous sleep disorder specialist. While snoring is not the most seductive investment topic, it seems there’s potentially big money to be made treating it and related problems.

SomnoMed is growing product sales across the Americas, Europe and Asia Pacific region. The key differential to ResMed is that SomnoMed’s mouthguard-like devices are relatively non-intrusive to use, whereas the main therapy for sleep apnoea treatment currently is continuous positive airway pressure (CPAP), which requires a face mask to be worn by users. The majority of SomnoMed’s business comes via dentists, and the company excites investors because it may be that an increasing number of sleep apnoea patients choose to use the more convenient mouthguards over the face masks. The other key appeal is that the mouthguards are generally cheaper than more traditional CPAP treatment options.

At the end of the first half of the 2014 financial year SomnoMed had a cash balance of $4 million to fund its sales and marketing push in North America, although no dividends have been declared as the company prefers to invest for growth. Selling for $1.43 it trades on a price-earnings ratio of 89 based on an estimate of earnings per share (eps) of 1.6 cents for financial-year 2014. If the company is able to grow margins and revenues as it hopes then eps will rise rapidly off a small earnings base. Somnomed looks a speculative buy based on its potential to rapidly grow sales in an expanding market.

Other smaller healthcare stocks looking to grow sales include Sirtex Medical Limited (ASX: SRX), Mayne Pharma Group Ltd (ASX: MYX) and Acrux Limited (ASX: ACR). Acrux is a testosterone therapy producer that has seen sales of its key product, Axiron, fall on the back of a health scare in its key North American market. However, a U.S. Food and Drug Administration announcement on June 19 that it would require wider health warnings on FDA-approved testosterone products appears to have helped Acrux’s share price recover from very low levels. However, this warning is not related to another ongoing testosterone therapy investigation, and the next key numbers for Acrux will be Q2 2014 sales figures likely to be released in late July. The old adage that sex sells means the global testosterone replacement therapy market remains extremely lucrative for any business able to capitalise on it. Acrux also offers tax free capital gains and looks a speculative buy based on its potential to ride out potentially short-terms issues and start growing sales again.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Tom Richardson owns shares in Sirtex, Resmed and Acrux.  You can find him on Twitter @tommyr345

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

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

The share price of ASX infant products retailer Baby Bunting Group Ltd (ASX:BBN) has been a solid performer so far …

Read more »

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

3 ASX ETFs that invest in companies fighting climate change

A new landmark report by the Intergovernmental Panel on Climate Change (IPCC) was released earlier this week. It provided a …

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 Limited (ASX: AMS) share price has been on a tear this past week, rising 15% on the back …

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

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

Online furniture retailer Temple & Webster Group Ltd (ASX: TPW) had a breakout year in 2020, moving from relative obscurity …

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

Shares in ASX healthcare company Polynovo Limited (ASX: PNV) almost doubled in price last year. And, despite a shaky start …

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

Investing in other geographic markets has become a popular way to diversify a portfolio. The risks associated with being exposed …

Read more »

person reading news on mobile phone
⏸️ Investing

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

Despite the News Corporation (ASX: NWS) share price getting a 31% bump between November last year and today, News Corp …

Read more »