The Cochlear Limited (ASX: COH) share price could be heading higher from current levels.
That's the view of analysts at Goldman Sachs, which have just reiterated their buy rating on the hearing solutions company's shares.
This follows the release of a strong full year result for FY 2022 last week.
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What is Goldman saying about the Cochlear share price?
According to note out of the investment bank, Goldman has reiterated its buy rating with an improved price target of $247.00.
Based on the current Cochlear share price of $218.86, this implies potential upside of 13% for investors over the next 12 months.
Goldman was impressed with the company's performance, noting that "in a highly challenging year Cochlear delivered +17% NPAT growth to reach the upper-half of the guided range."
The good news is that the broker is expecting more of the same in FY 2023. It said:
In our view, the backdrop for this year appears relatively more favourable, and we see clear scope for COH to deliver at the upper-end of another solid guidance (+8-13% to $290-305m, with further accretion possible from the Oticon Medical transaction, which is yet to close).
What about the medium term?
The good news for the Cochlear share price is that Goldman Sachs doesn't expect the company's growth to stop in FY 2023.
Its analysts believe the company is well-placed to continue this solid form through until at least FY 2025. It explained:
Overall, our NPAT forecast of $301m is at the upper-end of the guided range $290-305m, and we forecast a +10% CAGR from FY22-25E.
And while the broker acknowledges that Cochlear's shares are not cheap at current levels, it still believes they are good value compared to historic multiples and due to its positive and uncomplicated outlook. The broker said:
Whilst valuation of 28x EV/EBITDA appears high in absolute terms, it is still only in-line with its 5-year average and modestly above its 10-yr. Looking across the other 'recovery' plays in our coverage, there is less complexity to COH's near/mid-term earnings profile, and we believe it will ultimately experience lower and/or shorter-lived margin pressure through the pandemic period than peers.
