Nanosonics (ASX:NAN) share price soars 17% on ‘significant recovery’

Investors are clearly impressed with how the company has been performing.

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The Nanosonics Ltd (ASX: NAN) share price is having a bumper start to the day after the company released its FY21 full-year results this morning.

Once coined “the next CSL Limited (ASX: CSL)”, Nanosonics has struggled to live up to expectations following weak FY21 first-half and FY20 earnings. The Nanosonics share price fell 8.15% and 9.61%, respectively following the release of these results.

But today it’s a different story with investors clearly pleased by how the company has been performing. At the time of writing, Nanosonics shares are trading 16.89% higher at $6.885.

Nanosonics share price rockets higher despite profit fall

Despite today’s gains, the Nanosonics share price is still down by around 16% year to date. So this morning’s rally will come as welcome news for shareholders. Key highlights of the company’s FY21 performance include:

  • Revenue up 3.0% against the prior corresponding period (pcp) to $103.1 million.
  • Significant recovery in the FY21 second half, with revenue up 39% compared to the first half.
  • The global installed base rose 13% to 26,750 units.
  • Earnings before interest and tax was down 7% to $10.8 million.
  • Profit after income tax fell 15% to $8.6 million.

What happened for Nanosonics in FY21?

FY21 proved to be a challenging year for the Nanosonics share price.

But despite what could be seen as a relatively flat financial performance, today’s results announcement focused on the narrative that the company experienced a “significant recovery” in the second half of FY21. The second-half recovery was driven by an improvement in market conditions and hospital procedure volumes recovering towards pre-COVID-19 levels.

Breaking down the company’s revenue of $103.1 million, 1H21 revenues fell 11.3% on the pcp to $43.1 million, while 2H21 revenues bounced back 16.3%.

The recovery theme was reflected across the company’s business divisions including consumables, services and capital.

Nanosonics continues to invest in its strategic growth agenda with operating expenses up 12% to $70.8 million. It cited that, as market conditions improved in the second half, Q4 expenses of $20.3 million represented 29% of total operating expenditure as the company returned to its intended investment run rate.

Management commentary

Nanosonics CEO and president Michael Kavanagh commented on the challenging year:

The 2021 financial year was an important year of progress where the Company successfully adapted to the global challenges associated with COVID-19. Despite varying constraints and disruptions, the Nanosonics team continued to progress many aspects of our strategic growth agenda. Significant growth was achieved in the second half of the year as market conditions improved. This saw total revenue growing 39% compared with the first half resulting from strong growth in the installed base as well as ultrasound procedures trending back towards pre-COVID-19 levels.

What’s next for Nanosonics?

In comparison to many of its peers, the Nanosonics share price still has a lot of catching up to do in 2021. The S&P/ASX 200 Health Care Index (ASX: XHJ) is up 12% year to date.

Nanosonics has continued to increase its investments in infrastructure growth and market expansion across key geographic regions.

The company is currently finalising the registration of a wholly-owned foreign enterprise in China and preparing for regulatory submission to approve its trophon2 product for commercialisation.

Encouragingly, Nanosonics said that “Despite the inherent risks and uncertainties associated with COVID-19, in particular those emerging with different strains of the virus, Nanosonics remains optimistic that the improved market conditions will continue as vaccination numbers increase across all major markets.”

Assuming that such trends continue, the company anticipates a return to double-digit growth in total revenue in FY22.

Nanosonics share price snapshot

As well as a lacklustre year-to-date performance, prior to today, the Nanosonics share price had also fallen by around 14% over the past twelve months. This morning’s boost, however, has eradicated those losses to put the company’s shares 0.2% higher for the past year. Based on the current share price, the company has a market capitalisation of around $1.8 billion.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. and Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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