Shares in Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) have absolutely thrashed both the S&P/ASX 200 (INDEXASX: XJO) and its rival ResMed Inc. (CHESS) (ASX: RMD) over the past 12 months, producing a gain of 43.6% versus gains of just 1.7% and 0.7% for the index and ResMed respectively.
Given the strong rally in Fisher & Paykel's share price coupled with the relative underperformance of ResMed's share price it would be understandable for value investors to take a closer look at ResMed. That thinking certainly makes sense, however there are also a number of reasons to remain positive about the outlook for the New Zealand-based Fisher & Paykel. Here are three of them.
Fisher & Paykel has built a state-of-the-art manufacturing facility in the low-cost location of Tijuana, Mexico. The facility houses around 500 employees and manufactures consumable parts for both obstructive sleep apnea devices and respiratory and acute care devices. Furthermore, in the next three years management expects the Mexico plant to expand to manufacturing approximately half of the company's consumable product volume.
The location of the Mexico facility provides easy access to Fisher & Paykel's US and Canadian distribution centres and reduces exchange rate risks which create further cost efficiencies for the group.
Fisher & Paykel appears to be in a sweet spot in terms of growth with the group recording revenue growth of 13% in the year to March; expanding margins also saw profits soar by 26%. With further cost efficiencies likely to be attained thanks to the Mexico facility, these margins could potentially expand even further in the coming years.
