Why it may be time to sell your Cochlear Limited shares

The Cochlear Limited (ASX:COH) share price has been one of the best performers this year. But is it time to take profit?

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Year-to-date the Cochlear Limited (ASX: COH) share price has put on an impressive gain of almost 50%.

Investors have been fighting to get hold of the implantable hearing solutions provider's shares due largely to its strong full-year result and guidance for FY 2018.

In FY 2017 Cochlear posted a record net profit of $224 million and has forecast net profit of $240 million to $250 million in FY 2018 based on an AUD/USD exchange rate of 80 U.S. cents.

However, not everyone is positive on Cochlear.

In fact, this morning a research note out of the Macquarie equities desk revealed that the broker has initiated coverage on the company with an underperform rating and $161.00 price target.

This price target is almost 12% lower than Friday's close price.

According to the note, the broker believes that the current share price has factored in a much greater market share gain than the company has forecast.

Macquarie doesn't appear to be convinced that the company will be capable of outperforming its forecasts to such a degree and its share price may suffer as a result.

Cochlear isn't the only healthcare share trading on high valuations. Both Nanosonics Ltd. (ASX: NAN) and CSL Limited (ASX: CSL) trade at a premium to the market-average. Time will tell whether they all deliver sufficient growth to justify the premiums.

Motley Fool contributor Motley Fool Staff 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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