Healthcare shares have long been outperformers on the S&P/ASX 200 Index (ASX: XJO) and in the general sharemarket. But in recent weeks, many ASX 200 healthcare shares have faced setbacks in the wake of significant share price run ups, weaker than expected earnings and sharp selloffs.
Could these 2 ASX 200 healthcare shares be in the buy zone yet? Let's take a look.
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1. Nanosonics Ltd (ASX: NAN)
Nanosonics has been able to trade at an eye-watering valuation on the hopes that it would become the next CSL Limited (ASX: CSL) within the ultrasound probe disinfection market. The company boasts a $1.75 billion valuation with a price-to-earnings (P/E) ratio of 180.
Following a weak FY20 earnings report on 25 August, the Nanosonics share price has drifted 10% lower. The company delivered a 19% increase in revenue to $100.1 million while profit before tax fell to $12.4 million. This compared to $16.8 million in FY19.
In the first three quarters of the year, total revenue was up 26% on pcp. In Q4, when the main impacts of COVID-19 were experienced, revenue increased by only 1%. While Nanosonics has experienced a weak earnings period, the significant global market opportunity remains intact. The company has approximately 20% global market penetration of the ultrasound probe disinfection market.
Key geographic opportunities include North America, Europe, the Middle East and Asia. The business continues to focus on its Japan market development strategy with distribution agreements in place with five key distributors and the continued development of a China market entry strategy. Nanosonics could be a solid ASX 200 healthcare share to own for long-term investors given the significant global market opportunity at hand.
2. Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
The Fisher & Paykel share price has soared more than 45% this year following the tailwinds that COVID-19 has brought for its business. In its latest business update announced on 18 August, the company cited strong demand for its hospital respiratory care products with hospital hardware sales in the first four months of FY21 increasing 390% on pcp. The company is seeing that revenue by geography tends to follow the incidence of COVID-19 cases and the recent resurgence of COVID-19 cases across Europe, India and US could see further earnings tailwinds for its respiratory products.
The business update also forecasted FY21 operating revenue to be approximately $1.61bn and net profit after tax to be within the range of $365 million to $385 million. This would represent an increase of 27-34% on FY20. I believe Fisher & Paykel could see an elevated growth trajectory for the short to medium term driven by COVID-19 related tailwinds. I believe its recent pullback could be a buying opportunity.
