This year has been a bit of a mixed bag for ASX healthcare companies. Many have seen their share prices surge higher as investors sought out the safety of defensive shares in the face of extreme economic uncertainty.
The share price of respiratory disease specialist Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) has skyrocketed almost 60% higher this year, while shares in US-based competitor ResMed Inc (ASX: RMD) are also up around 30%.
But other big-name companies have struggled to ignite the market. Despite massive swings in its share price over recent months, leading biotech company CSL Limited (ASX: CSL) has only managed gains of a little over 2% so far this year. And Australian healthcare giant Cochlear Limited (ASX: COH) was so adversely impacted by the coronavirus pandemic that it had to withdraw its FY20 earnings guidance back in March.
In a trading update to the market released in May, Cochlear reported that sales revenues for the month of April had declined by 60% versus April 2019. The massive decline was due mostly to many countries postponing elective surgeries as they increased hospital capacity for coronavirus patients.
Whether or not sales will bounce back in future months as countries control the spread of COVID-19 will remain to be seen, but the market doesn’t seem too confident. The Cochlear share price is down over 15% so far this year – and that’s despite it recovering 23% since bottoming out at a 52-week low price of $154.6 in late March.
Why is the current Polynovo share price a buy?
In the face of such extreme volatility and uncertainty, it’s a surprise that more investors haven’t flocked to Polynovo Limited (ASX: PNV), in my opinion. Polynovo is a junior healthcare company with a focus on biodegradable medical devices that aid in skin tissue repair. Its flagship medical technology is called NovoSorb, a synthetic polymer matrix that clinicians can use to treat serious burn and skin trauma patients.
Polynovo had long stated that, despite the logistical difficulties faced by its sales team due to COVID-19 travel restrictions, it hadn’t seen any adverse financial impacts from the pandemic. In an update released to the market on Friday, Polynovo reported record high monthly sales in the US in June, plus the company’s first sales in the UK. Sales for the June quarter increased by 33% over the previous quarter, and the company reiterated its FY20 sales guidance for sales growth of at least 100% over FY19.
And yet, on the day of that announcement, Polynovo shares still slid 0.41% lower to $2.43. At today’s price of $2.39, the Polynovo share price is 27% lower than the 52-week high of $3.285 it reached in February, despite the business’ continued underlying sales growth.
Should you invest?
The growth in its sales numbers mean that Polynovo is probably in a stronger financial position now than it was prior to the coronavirus crisis. Plus, it has proven that it can outperform bigger players in the healthcare sector, even in a crisis.
At these prices, I would suggest that Polynovo offers great value for new investors, and I think it is in a great position to deliver sustained growth over the longer-term.
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Rhys Brock owns shares of Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and POLYNOVO FPO. The Motley Fool Australia has recommended Cochlear Ltd. 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.