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Is the Somnomed share price a turnaround story?

The Somnomed Limited (ASX: SOM) share price opened 6.7% higher at $1.60 today after the sleep treatment medical device business reported an operating cash profit of $798,000 on revenue of $17.95 million for the quarter ending June 30, 2019. For the financial year the company posted an operating cash loss of $6.2 million on revenue of $65.1 million.

The company has been through something of a ‘reset’ or ‘turnaround’ year that involved it scrapping some of its third party distribution sales channels to focus on direct sales, with the worse side effects of that decision now starting to cycle out of its accounts. 

“The prospects for the SomnoMed Group are very positive and the return of strong revenue growth in both the US and Canada has brought energy and excitement back into the company. SomnoMed offers a patient friendly and highly compliant, comfortable alternative to CPAP which aims to treat a growing proportion of patients who suffer from Obstructive Sleep Apnea (“OSA”) with a COATT device,” commented 

As such Somnomed competes with larger sleep treatment businesses such as ResMed Inc. (ASX: RMD) and Fisher & Paykel Healthcare Ltd (ASX: FPH) by offering a more convenient mouthguard-like product than the masks and airflow machines that are the core products of its much bigger rivals.

SomonMed looks a business worth further research for small-cap enthusiasts as it progresses its turnaround story. 

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Motley Fool contributor Tom Richardson owns shares of ResMed Inc.

You can find Tom on Twitter @tommyr345

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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