Nanosonics Ltd (ASX: NAN) shares have fallen almost 30% over the past year, but according to the team at RBC Capital Markets, they could be primed for a recovery.
The broking house has just released a new research report on the company and has assigned it an outperform rating and a bullish share price target, which I'll get to shortly.
First, let's look at the company's most recent news – its FY26 financial results and the announcement of a share buyback.
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Steady year, with core business performing well
Nanosonics' main revenue-generating business at the moment is its Trophon division, which placed 4230 new units during the year, up 9%.
The company's revenue was up 3% to $203.9 million, while EBIT was $16 million, down 10%.
If the Trophon division is looked at on a stand-alone basis, its EBIT would be $50.6 million.
The company had no debt and cash on hand of $155.2 million at the end of the year, having completed a $20 million buyback.
Nanosonics also announced a new, $40 million buyback for FY27.
Chief Executive Officer Michael Kavanagh said:
Nanosonics is entering a defining period of growth. FY26 demonstrated the strength of the business we have built: a proven Trophon franchise, disciplined financial execution and in FY27 we will progress the CORIS System from CMR to commercialisation. Trophon remains the economic engine for Nanosonics and an important foundation for future value creation. We delivered 6% revenue growth and 21% EBIT growth in constant currency. We achieved our strongest annual placement volume in three years, record upgrades in North America and expanded the cumulative installed base. We also launched trophon3 and trophon2 Plus, and saw accelerating adoption of these next generation technologies in the second half.
Mr Kavanagh said the CORIS system had the potential to establish a new standard of care in endoscope reprocessing and build a recurring revenue business over time.
He said the company planned to launch CORIS across the UK, Ireland, and Australia in the first half of FY27, with the US launch to follow.
Shares looking cheap, broker says
RBC Capital Markets said in their research note that the current Nanosonics share price "is implying an overly bearish scenario''.
They added:
NAN's Trophon business improved its profitability with EBIT increasing from $47m in FY25 to $50m in FY26. While we expect Trophon capital sales will be negatively impacted by tariffs in higher freight costs, we expect absolute profitability to continue increasing in FY27 and are forecasting Trophon only EBIT of $54m (+8%). We value the Trophon only business at $3.55/share.
RBC has revised its forecasts to assume CORIS hits breakeven over the horizon period.
Its price target for Nanosonics shares has increased from $3 to $3.75, compared with a share price of $2.88 at the time of writing.
Nanosonics is valued at $836.9 million.
