It was a great month for Nanosonics and its shareholders…
The post The Nanosonics (ASX:NAN) share price rocketed 25% higher in August appeared first on The Motley Fool Australia. –
The Nanosonics Ltd (ASX: NAN) share price was a very strong performer in August.
During the month, the infection prevention company’s shares rose a sizeable 25%.
Why did the Nanosonics share price rocket higher in August?
The catalyst for the strong gain by the Nanosonics share price last month was the release of its full year results.
Not only did these results come in ahead of expectations, but the company also pleased the market by announcing a major new product.
Let’s start with its results. For the 12 months ended 30 June, Nanosonics reported a 3% increase in revenue to $103.1 million and a 15% decline in net profit after tax to $8.6 million.
While a profit decline might not seem like something to celebrate, it was notably better than the market was expecting. This was driven by a stronger than expected second half recovery.
What about the new product?
As positive as the result was, the announcement of its new product may have given the Nanosonics share price the biggest lift.
That product is Nanosonics Coris, a flexible endoscopes disinfection system.
Management notes that more healthcare-associated outbreaks have been linked to contaminated endoscopes than any other medical device.
And with over 60 million flexible endoscopy procedures being conducted across the United States and the five largest markets in Europe each year, this provides it with a significant market opportunity in the coming years.
However, this product won’t be boosting its FY 2022 results. This is because management is targeting a launch in calendar year 2023.
It is also worth noting that the company has a track record of failing to deliver on product launch promises. So, it isn’t inconceivable that this launch date will get pushed back.
Is it too late to invest?
One leading broker that unfortunately believes it is too late to invest is Goldman Sachs.
Its analysts have recently retained their sell rating and cut their price target to $4.40.
Based on the latest Nanosonics share price of $6.67, this implies potential downside of 34% over the next 12 month.
Goldman commented: “We post FY22/23E sales upgrades of +6/+8% to factor the FY21 beat and FX gains, but incorporating new cost/margin guidance drives (19)/(25)% downgrades to our FY22/FY23E EBITDA forecasts, and a (11)% reduction in our TP to $4.40. Although this stock has not historically traded on near-term multiples, posting these downgrades drives 2022E trading multiples up to 125x EBITDA (180x P/E) valuations which would ordinarily be associated with much higher growth profiles (we now forecast sales/earnings CAGRs of +8%/+15 from FY22-25E).”
Should you invest $1,000 in Nanosonics right now?
Before you consider Nanosonics, you’ll want to hear this.
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*Returns as of August 16th 2021
Motley Fool contributor James Mickleboro 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 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.