Reporting season has seen some ripples across the healthcare sector on the S&P/ASX 200.
Here’s a quick check-up on three well-known health stocks below.
Sigma Healthcare Ltd (ASX: SIG)
Shares in wholesale and distribution pharmaceutical company Sigma Healthcare are back in the black today – up 5% to 56c per share at the time of writing – after landing at the top of the S&P/ASX 200 fallers list yesterday.
Sigma’s shares plunged off the back of the release of its half-year results, with the report showing underlying NPAT was down 31.2% to $19.9 million, EBITDA fell 32.6% and revenue was down 2%.
But it’s not all doom and gloom for Sigma, which may be why the market has rallied back behind the stock today.
Sigma is on track to meet its FY19 EBIT guidance of $75 million, with its first-half performance hit most hard by a decline in demand for its Hepatitis C medication, with PBS pricing adding an extra sting.
A stronger second half is expected with the company reporting on its cost savings, but no doubt the loss of the Chemist Warehouse supply agreement will weigh as Sigma progresses through FY19 with the agreement in place currently due to cease on June 30, 2019.
While yesterday’s drop in price might have tempted some to buy in, a better option in the industry right now might be Australian Pharmaceutical Industries Ltd (ASX: API).
Australian Pharma will hand down its interim report next month with investors no doubt keen to get an update on its performance.
Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC)
Global hospital group Ramsay Health Care Limited shares have been on a gradual decline in the last 12 months to sit at $53.94 at the time of writing – down 0.5%.
Ramsay yesterday announced its French subsidiary has lodged an offer with the Swedish Financial Supervisory Authority for its SEK48.5 cash per share takeover offer for Capipo AB – with the acceptance period expiring in late October.
Ramsay could do with this boost to its European operations, all going well, but its FY19 profit guidance of up to 2% growth will likely do little to enthuse investors who were accustomed to its previous track record of double-digit growth.
However, Ramsay does have a good foothold in the market to provide services to our ageing population and, in the long term, this will likely make its operations even more attractive across several global markets.
But for now, sentiment is still a bit low for the stock and punters are no doubt seeking more solid growth to pin their hopes on in the short to medium term.
Nanosonics Ltd (ASX: NAN)
This infection control company is still hanging about in small cap territory or thereabouts, but it’s hard to see its future as anything other than bright given its niche market positioning and potential for growth.
But investors were recently spooked by softer-than-expected results out of Nanosonics, with FY18 profit after tax dropping 79% on FY17, total sales down 10% and an uptick in operating expenses from $37 million to $42.6 million.
But with Nanosonics in a growth phase, some reduction in profits was likely, although it makes sense that the market would have liked to see better revenue figures out of its North American market- which was down to $54.4 million for FY18 from $62.3 million in FY17.
Global interest in Nanosonics’ Trophon product is on the up, with take up growing in Europe, the Middle East and Africa, and this is the type of growth pipeline investors willing to hold will be searching for to translate into future gains.
But the company is still a speculative pick for now, and if you’re not keen on taking such risks, it might be best left alone, with Pro Medicus Limited (ASX: PME) perhaps worth doing some study on as an alternative.
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Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and Pro Medicus Ltd. The Motley Fool Australia has recommended Ramsay Health Care 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 Scott Phillips.