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Broker slaps $3.40 share price target on Nanosonics Ltd

The research analysts at sell-side broker Morgans have reportedly been running the ruler over up-and-coming hospital equipment business Nanosonics Ltd (ASX: NAN) and lifted their share price target to $3.40 per share.

Nanosonics manufactures and sells ultrasound probe disinfectant devices and grew unit sales 41% over 2017, with the majority of the sales in the giant U.S. healthcare market.

It is also successfully expanding sales growth in Europe and Asia. Overall, it posted a profit (before an income tax benefit) of $13.9 million on sales of $67.5 million over the year and is reinvesting heavily in developing new products that target the infection control market.

Unfortunately, Nanosonics’ potential is no secret with the company’s current value of $871 million around 62x its trailing profit before income tax which means it needs to deliver several years of strong profit growth to justify today’s valuation.

Notably, it was only back in August 2017 that Morgans reportedly cut its share price target 19% to $2.91 prior to today’s new of an upgrade. This goes to show how sell-side brokerage houses that also have research desks like to chop and change share price targets in order to drum up commissions every time investors trade in response to them. I’d rate the stock a hold for now, although I’m a buyer of it gets much cheaper.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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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