Virtus share price holds steady despite 30% earnings fall

Shareholders are staying loyal with a looming acquisition.
The post Virtus share price holds steady despite 30% earnings fall appeared first on The Motley Fool Australia. –

The Virtus Health Ltd (ASX: VRT) share price is firmly nested at its previous closing price today. Typically, that would be a non-event not worth reporting on. However, today it is striking considering what the fertility treatment company reported.

Today, shareholders are scanning through Virtus’ FY22 April year-to-date trading update. Interestingly, the market is barely batting an eye at the company’s performance despite posting some weaker numbers.

As we head into the afternoon, Virtus shares are staying flat at $8.15 apiece. Meanwhile, the broader S&P/ASX 200 Index (ASX: XJO) is strutting through Friday’s session in style, sporting a 1.6% rise.

Acquisition process creates distraction

Virtus shareholders are holding the line on Friday after the company released its latest trading update. The announcement concerns the business performance for the first 10 months through to 30 April 2022.

Firstly, the good news — Virtus highlighted its belief that the underlying demand for assisted reproductive services continues.

Furthermore, the company’s IVF market share in Australia avoided erosion. Virtus pointed towards data available from Medicare that illustrates that the reproductive specialist performed slightly more IVF fresh cycles in relative terms compared to the rest of the market.

However, there was some disappointing news for shareholders contained in today’s update. For instance, a few key metrics for the business all showed a decline for the 10-month period compared to the prior corresponding period. These included:

Fresh cycle growth down 3.9%
Revenue growth down 1.6%; and
Earnings before interest, tax, depreciation, and amortisation (EBITDA) down 29.6%

Surprisingly, the Virtus share price is largely unaffected by these numbers today. Though, the company provided a caveat, stating:

As seasonality typically sees May and June contribute more strongly to profitability, the 10 months to 30 April does not necessarily represent the profile for the full year earnings.

In addition, Virtus CEO Kate Munnings said:

The team at Virtus, including fertility specialists, scientists, clinical and administration staff, have worked incredibly hard over the past 10 months to help people become parents during challenging market conditions. Despite the additional pressure of the Acquisition Process, our strategic initiatives, including our Precision Fertility Digital Platform have progressed well during FY22 and they will lay the foundation for scalable growth of Virtus Health.

What’s the outlook?

The outlook supplied for the fourth quarter, and for FY22, was relatively vague. According to Virtus, the risk of more COVID-19-related disruptions are still a concern. The byproduct of this is larger month-to-month variances than historically seen.

In turn, the company is taking steps to manage these outsized variances moving forward.

Virtus Health share price snapshot

The Virtus share price has been grinding higher in 2022 as BGH Capital and CapVest duke it out to acquire the company. Pleasingly, shareholders have watched on as shares have ascended nearly 21% year-to-date.

Despite the contest, Virtus is still trading on a price-to-earnings (P/E) ratio of ~24 times. This is compared to the healthcare industry average valuation of 25 times.

The post Virtus share price holds steady despite 30% earnings fall appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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