Why the CogState Limited share price fell 7% today

In morning trade the CogState Limited (ASX: CGS) share price has been one of the worst performers on the market.

At the time of writing the cognitive science company’s shares are down almost 7% to $1.05.

Why have its shares fallen?

This morning CogState released a disappointing full-year trading update which revealed that the strong revenue growth that was seen in the first-half has not been sustained in the second-half.

According to the release, due to delays in the execution of sales contracts, second-half revenue from clinical trials is expected to come in at $16.2 million, a decrease of $2.2 million or 12% from the prior corresponding period.

While this will lead to full-year revenue of $34.6 million and a year-on-year increase of 27%, the market was expecting an even better result following the strong first-half.

Furthermore, as a result of the weaker second-half, management expects the company to post a net loss before tax of approximately $1 million for the year ended 30 June 2017.

Should you buy the dip?

Whilst I am a big fan of the company and believe the growing demand for its technology from pharmaceutical companies could allow it to grow its top line at a strong rate for the foreseeable future, I’m not yet a buyer of its shares just yet largely on valuation grounds.

With a market cap of approximately $128 million and an expected full-year loss of $1 million, I’d only consider investing if its share price fell to a more appropriate level.

In the meantime I would suggest investors consider an investment in fellow medical technology shares Nanosonics Ltd. (ASX: NAN) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) instead.

Alternatively, one of these growth shares could be even better. Do you own them?

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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