Shares of Virtus Health Ltd (ASX: VRT) rocketed more than 14% higher today to a top of $5.26 even though the medical group reported a slide of nearly 5% in its annual net profit.
So What: Virtus Health, which is Australia's largest provider of in-vitro fertilisation, or IVF treatment, disappointed investors in June when it downgraded its earnings guidance and said it had lost market share in some of its key markets.
At the time, it told investors to expect "low-to-mid-single digit percentage growth" in net profit after tax, or NPAT, which compared to previous guidance of "low-to-mid teens" growth.
Although the group's earnings fell 4.7% for the period to $29.4 million, its underlying result, which excludes one-time items such as acquisition costs and costs associated with setting up a new clinic in Singapore, actually grew 5.1% to $33.6 million.
In other words, underlying earnings came in at the higher end of the range provided by management in June, while revenue also grew 16.1% compared to the previous year to $233.7 million.
During the 12 months ended 30 June 2015, Virtus said it had grown its cycle numbers by 1.4% to 15,100 in Australia (17,064 globally), while it also lifted its national market share to 37.1%, partially thanks to its TasIVF acquisition.
However, its market share in New South Wales, Victoria and Queensland fell from 45.5% to 44.1%. This is partially due to NSW growing by 4.5% as a result of the entrance of a new bulk bill provider, while economic conditions continue to impact its operations in Victoria and Queensland.
Now What: Although the company's ability to maintain market share in an increasingly competitive environment needs to be watched by investors, Virtus Health remains a top-notch company and could be an excellent buy at today's price level.
