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Why Fisher & Paykel Healthcare Corp Ltd shares climbed 14% in June

Fisher and Paykel Healthcare Corp (ASX: FPH) shares finished the month on a roll – up $1.77 for the month to close last Friday at $13.68 a share. 

Fisher & Paykel Healthcare Corp sits in the ASX 200 index with a value of around $7.87 billion. The company designs and manufactures products to treat sleep-disorder breathing conditions. Its products are sold in over 120 countries. 

The company is trading on a PE of about 43 which is somewhat below Cochlear Ltd (ASX: COH) which trades on a PE of around 50.

For FY2018 the company reported gross revenue of NZ$981 million and a gross margin of NZ$650.4 million or 66.3% of sales. Net profit after tax increased from 2017 by 19.4% to NZ$190.2 million. 

I think investors are looking closely at the significant growth opportunities for this company in the years ahead for both homecare and hospitals.

For FY2018 the company reported 27% growth with new applications such as the Optiflow nasal high flow therapy – used in hospitals to treat a broad range of respiratory complications. The ageing population particularly in western countries will result in an increasingly large market for respiratory devices.

In the US alone, the percentage of those aged 65 years and above is likely to increase by 80% over the next 20 years. 

Asia only accounts for about 18% of the revenue base currently and this market should present numerous growth opportunities in the years ahead. In China alone, respiratory disease is one the leading causes of death. The country is expected to report an annual 800,000 lung case diagnoses by the year 2020.  

Foolish takeaway

With healthcare stocks one of the market’s best performing categories in 2018, I think all healthcare stocks with consistent earnings growth, strong balance sheets, solid net cash flow and a clearly defined strategic path deserve investors’ close inspection.

I would expect Fisher and Paykel to be a great buy and hold investment which should outperform the market if current growth levels are maintained. 

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Motley Fool contributor Matthew Reynolds 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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