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Results: Are Fisher & Paykel Healthcare Corp Ltd (ASX:FPH) shares in the buy zone?

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price has edged higher in morning trade following the release of its half year results.

Here’s how the company performed in the first half compared to the prior corresponding period:

  • Operating revenue up 12% to NZ$511.3 million.
  • Core Products revenue up 12% to NZ$508.4 million.
  • Gross margin up 80 basis points to 66.8%.
  • Net profit after tax increased 20% to NZ$97.4 million.
  • Half year earnings per share of 17 cents.
  • Outlook: Full year profit growth between 7.8% and 10.4%.

Fisher & Paykel Healthcare Corp’s solid half year result was driven by growth across all business units and geographies.

The highlight was arguably its key North America business which delivered a 14% increase in revenue to NZ$240.9 million. This represented almost half of the company’s revenue during the six months.

Not far behind in terms of growth was the Asia Pacific business which delivered a 13% increase in revenue to NZ$106.7 million.

Its European business delivered an 8% lift in revenue to NZ$141.1 million and its Other regions business posted a 7% lift in revenue to NZ$22.6 million.

In respect to its product groups, the Hospital segment was its best performer with a 13% increase in revenue. Whereas the Homecare segment grew revenue by a solid 10% during the half.

Managing director and CEO, Lewis Gradon, revealed that its devices and systems used for nasal high flow therapy were behind the growth in its hospital business.

In the Homecare segment, which competes with the likes of ResMed Inc. (ASX: RMD) in the obstructive sleep apnea and respiratory support market, the company experienced robust demand for hardware devices such as its myAirvo and SleepStyle products.

Looking ahead, Mr Gradon has reminded shareholders that the company is cycling a strong period of growth in its Hospital segment in the second half. This was partly the result of a very strong Northern Hemisphere flu season.

So with management conservatively assuming a moderate flu season this time around, it has provided full year revenue guidance of approximately NZ$1.07 billion and net profit after tax in the range of approximately NZ$205 million to NZ$210 million. This represents growth of 9% and between 7.8% and 10.4%.

Should you invest?

Overall, I thought this was a solid result from Fisher & Paykel Healthcare Corp. However, its guidance for the full year is a little underwhelming in my opinion. Especially given that its shares are changing hands at 35x estimated forward earnings.

Based on this, I see more value in ResMed’s shares or fellow healthcare star CSL Limited (ASX: CSL) at this point.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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