26 September 2024
Hunting opportunities on the ASX
Published on LiveWire There is plenty of opportunity on the ASX, for those willing to do the work. Elston's Co-Founder and Portfolio Manager Andrew McKie is on the case. Read more
23rd February 2022 - Asset Management, Private Wealth
Cochlear Ltd (COH) is a global leader in implantable hearing solutions, with products sold in around 180 countries.
It’s estimated that, of the 460 million people with a hearing disability, there are 15 million people with severe to profound hearing loss. In terms of market penetration, less than 5% of that 15 million have received treatment. This means Cochlear has the potential for strong growth for many years to come, providing that it can maintain its market-leading position.
To help achieve this, Cochlear maintains an annual R&D spend of approximately 13% of sales. In dollar terms, this equates to $195m, which far exceeds their competitors. Even though this reinvestment can impact margins and therefore profitability, we believe it is critical in improving patient outcomes and the company’s ongoing success.
Because current patients will require upgrades periodically, and the cost of switching to another product is high, Cochlear does have a stable and growing revenue stream.
COVID has disrupted elective surgery. Cochlear has also seen supply chain problems hamper production. However, they carry an extremely strong balance sheet, and have been able to navigate these challenges without long term implications.
In terms of valuation, Cochlear trades on an earnings multiple higher than we would usually consider prudent. However, there are a number of reasons why we remain comfortable, even given the expected rise in bond yields (that in today’s dollars decrease the value of future earnings).
If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.
26 September 2024
Published on LiveWire There is plenty of opportunity on the ASX, for those willing to do the work. Elston's Co-Founder and Portfolio Manager Andrew McKie is on the case. Read more
23 September 2024
Following on from the reporting season, Portfolio Manager Leon de Wet has provided a brief overview of the recent results and what that indicates for future earnings and the portfolio positioning. Read more
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