ResMed Inc (ASX: RMD) has grown exponentially over the last few years, and is now a large-cap company and one of the leading healthcare blue-chips trading on the ASX, alongside the likes of CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).
Long-term investors who bought shares in ResMed when it was valued at under $2.50 back in early 2012 would now be sitting on a gain of more than 800%. Just last month, ResMed shares set a new all-time high price of $20.75.
ResMed has grown from humble beginnings to become one of the leading brands worldwide in the treatment of sleep apnoea and other related respiratory conditions. And those few canny investors with the foresight to predict ResMed’s incredible growth story are now sitting on a small fortune. However, another company – which so far seems to still be flying under the radar for many investors – could be poised to follow in ResMed’s footsteps.
Medical Developments International Ltd (ASX: MVP) develops a range of medical devices and healthcare products for pain management as well as the treatment of asthma and other respiratory diseases. Its products are specifically targeted towards hospitals and emergency service professionals and include devices like masks, ventilators and resuscitation kits, as well as the trauma pain medication Penthrox. The company also manufacturers a similar range of devices, including asthma chambers and anaesthetic machines, for use in veterinary medicine.
Medical Developments International is a fast growing company and has reported some strong financial results recently. In fact, FY19 may even be looked back upon as the company’s breakout year. It brought in a record $21.4 million in revenue, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 55% year-on-year to $3.4 million. But the real story from its results was the astronomical surge in the company’s net profit after tax (NPAT), which skyrocketed 327% higher to a little over $1 million. This demonstrates how expansive profit margins can be for companies with specialised products and knowledge operating in the healthcare sector.
What is also evident from the annual report is how quickly Medical Developments International is expanding its global footprint. In FY19, sales in the UK increased by 68%, while for the rest of Europe sales were up by a whopping 401%, supported by the fact that the company now has regulatory approvals in 27 European countries. Plus, it also has regulatory approvals granted in Hong Kong, Saudi Arabia and Jordan, with regulatory submissions ongoing in other potentially lucrative markets including the USA, Iran, South Korea and Russia.
While this may look like a pretty fantastic growth story on paper, Medical Developments International is still a small company when compared to peers in the healthcare industry like Cochlear, CSL and ResMed, and it will take some time before it can prove itself as a financially secure investment. The key risk to Medical Developments International – as is the case for any relatively new entrant into the healthcare sector – is that technological developments or scientific advancements may quickly render its devices, medications and treatments obsolete.
However, the fact that the company is quickly growing its global customer base does send the positive sign that medical professionals are investing a lot of faith in its products. Plus, the company has already shown that it can be profitable, which is also a reassuring sign for investors.
Overall, I think this makes Medical Developments International at least one to add to your watch lists for FY20. If it can continue to build on its successes, it could easily grow into the next healthcare blue chip.
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Motley Fool contributor Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia has recommended Cochlear Ltd., Medical Developments International Limited, and 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.