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UBS claims it’s time to sell your Cochlear (ASX:COH) shares

Cochlear Limited (ASX: COH) manufactures and distributes cochlear implantable devices for hearing impaired patients in Australia and more than 20 countries. 

UBS has updated its modelling of crucial drivers of Cochlear shares, resulting in minor changes to forecast earnings per share (EPS) by -3%. Forecast EPS growth will average 10.5% over the next three years.

Based on management’s comments at a recent investor day around operating expenditure to increase future market penetration and maintain net profit margins, UBS sees downside risk to FY19/FY20 Bloomberg’s consensus Net Profit After Tax.  

UBS has increased its share price target to A$170, up from $150. The share price is up 37% in a year, and at the current share price of $194, the company is a sell according to UBS.

Cochlear is trading on a forward price-earnings-ratio of 46x, which is a premium to the Health Care Equipment & Services industry median of  19.8x. 

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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. 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 Scott Phillips.

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