It has been a tough year for the ASX healthcare stock in this article.
Over the past 12 months, the company's shares have lost 60% of their value.
Unfortunately, one leading broker doesn't believe this is a buying opportunity and is urging investors to keep their powder dry for the time being.
Image source: Getty Images
Which ASX healthcare stock?
Bell Potter has turned lukewarm on Paragon Care Ltd (ASX: PGC) shares this week. It is a leading distributor of pharmaceutical medicines, consumables and capital products.
The broker highlights that the company has effectively downgraded its earnings guidance for FY 2026 due to higher costs stemming from the Middle East conflict. It said:
The company now expects FY26 revenues of $3.7bn and EBITDA in the range of $95m – $100m inclusive of the 3 month contribution from Haju Medical. The previous guidance (which excluded the estimated $2m (3 months) earnings contribution from Haju) was $97m – $107m.
We estimated the bottom end of the earlier guidance range has been downgraded by ~$4m. Not surprisingly the downgrade is the result of increased costs in logistics and supplier price increases associated with the inflationary impact of the Gulf conflict. The revenue guidance of $3.7bn is at the top end of the prior range ($3.6 – $3.7bn).
Another disappointment is the potential settlement for money owed by Infinity Group. Instead of a substantial portion of the $49 million owed, it now looks likely to be in the range of $11.7 million to $15.8 million. It adds:
Separately, administrators of the Infinity Group have advised a preliminary Estimated Outcome Analysis would result in a settlement to PGC in the range of $11.7m to $15.8m. The company had previously provided for the entire $49m, however, the Directors had expected to recover a substantial portion of this amount.
The estimated settlement follows submission of offers for various pharmacies within the group, most of which continue to trade. The settlement also requires agreement from all secured lenders of which PGC is one and is before Personal Guarantees from certain Directors of the Infinity Group.
Downgrade to hold
According to the note, Bell Potter has downgraded the ASX healthcare stock to a hold rating (from buy) with a heavily reduced price target of 17 cents (from 29 cents).
This is only a fraction higher than where its shares currently trade.
Commenting on the downgrade, the broker said:
2H26 has been a difficult period for the company in spite of the completion of two earnings accretive acquisitions in the period. We estimate across the board inflationary pressures in the core Australian business have ripped up to $4m in earnings out with little to no means to pass on these costs to customers in the short term. Consequently, it appears 2H26 EBITDA may be $4m – $5m below 1H26 before the earnings impact of acquisitions. FY26/27/28 EPS are reduced by 10%, 18% and 3%. Price target is reduced from $0.29 to $0.17.
