Why the Monash IVF share price crashed 25% lower today

The Monash IVF Group Ltd (ASX:MVF) share price has crashed lower after a disappointing market update…

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The worst performer on the All Ordinaries index by some distance on Thursday has been the Monash IVF Group Ltd (ASX: MVF) share price.

The fertility treatment company’s shares have crashed 25% lower to $1.06 in late morning trade.

Why has the Monash IVF share price crashed lower?

Investors have been hitting the sell button in a panic today after the company provided an update on its Victorian operations.

As some readers will be aware, the company’s operations in the state have been under significant pressure over the last 18 months due to the departure of its high-volume doctor, Dr Lynn Burmeister.

These operations are now likely to come under further pressure after the company was notified that five Victorian based fertility specialists would no longer be using its services from September.

These doctors currently refer patients for IVF treatment to Monash IVF, but now intend to follow the lead of Dr Burmeister and establish their own independent IVF clinics.

Collectively the group of doctors directly referred approximately 400 Stimulated Cycles for the year ended June 30, generating revenues of approximately $5.9 million.

Management estimates that its net profit after tax, on a variable contribution basis, for FY 2020 may be impacted by approximately $1.5 million to $2.5 million if all doctors cease referring to the company by the end of the first quarter.

Though it stressed that it has on‐going strategies for both growth and to mitigate the impact these departures will have on revenue and earnings.

Key initiatives include a focus on expanding the Monash IVF footprint through new clinics, the recruitment of new fertility specialists, and continuing to engage and grow its existing fertility specialists.

It also intends to remain focused on growing its full-service businesses through enhancing its best‐in‐class patient experience and scientific leadership and ensuring Monash IVF staff are engaged and share common principles and beliefs.

Finally, the company has an Asia Pacific expansion strategy in place and is looking out for acquisitions and partnerships.

Should you buy the dip?

Whilst this sell off looks to have been overdone, I wouldn’t be a buyer of its shares at this point as I’m not convinced that the departures are over with just yet.

Virtus Health Ltd (ASX: VRT) may be a better option in the space, especially given recent data which shows that Australian IVF volume trends are improving.

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

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