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Fisher & Paykel Healthcare Corp Ltd (ASX:FPH) shares sink on results release

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price has sunk lower in early trade following the release of its full year results.

At the time of writing the sleep treatment company’s shares are down 4% to $11.70.

What did Fisher & Paykel Healthcare report?

Fisher & Paykel Healthcare reported a record net profit after tax of NZ$190.2 million on record operating revenue of NZ$980.8 million. This was a 12% and 10% increase, respectively, on FY 2017’s result.

The main driver of growth for the company was its Hospital segment. Sales in the segment grew 14% on the prior corresponding period to NZ$572.1 million. Homecare segment sales grew 4% to NZ$398.1 million during the period.

The market was expecting net profit after tax of $188.7 million, so this profit result can be considered a slight beat.

As was its final dividend which was increased to 12.5 cents per share versus expectations of 11.3 cents per share.

So why is its share price sinking lower?

While the company may have outperformed expectations in FY 2018, it has fallen short with its guidance for FY 2019.

According to the Bloomberg consensus estimate, the market was expecting guidance of NZ$1,110 million on the top line and NZ$216 million on the bottom line. Whereas management’s guidance is for revenue of NZ$1,050 million and profit of NZ$210 million.

Considering the premium of 40x full year earnings that its shares traded at prior today, this growth is clearly not considered to be strong enough.

I would have to agree. Especially when rival Resmed Inc (ASX: RMD) is growing its bottom line at a far quicker rate on a much larger base. Furthermore, its shares are actually trading on a lower multiple as well.

In light of this, I would suggest invests skip Fisher & Paykel Healthcare and consider ResMed. Alternatively, healthcare stars Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL) could also be better options.

As well as ResMed, Cochlear, and CSL, I think these up and comers could be stars of the future.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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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