Want to hear about a good business? The Cochlear Limited (ASX: COH) share price could be worth considering.
Cochlear is one of the world’s leading medical businesses. Cochlear designs, manufactures and supplies the Nucleus cochlear implant, the Hybrid electro-acoustic implant and the Baha bone conduction implant. Graeme Clark invented the first device in 1982, allowing first-user Graham Carrick to hear for the first time for 17 years. Some of the most recent modifications allow users to play sound from their phone directly into their implant.
Is the Cochlear share price a buy?
If you could go in a time machine five years ago, buy shares and hold until now, you would be sitting on gains today of 227%. I doubt the next five years will yield the same great results, but there could be more growth to come.
In FY18 Cochlear reported sales revenue was up 9%, reported net profits were up 10% and the full year dividend grew by 11%. In FY19 the company provided guidance for net profit of between $265 million to $275 million, representing growth of another 8% to 12%.
Cochlear is regularly coming out with new technology innovations. In the second quarter of FY18 the world’s first ‘Made for iPhone’ cochlear implant sound processor was launched. In June 2018 the Nucleus Smart App for Android was released, allowing users with a compatible Android device to control their hearing with the app.
Providing new reasons for your customers to come back, upgrade or get new customers involved is an excellent use of effort & capital by Cochlear.
In October 2018, Cochlear announced that it was starting another clinical feasibility study about the development of its totally implantable implant technology, which could be used with or without an externally-worn sound processor to provide 24-hour hearing. I’d imagine this would be very popular with users, but also cost a lot more (which would be good for Cochlear’s revenue). This is still in the early stages.
Treating hearing loss is important because hearing loss is linked with greater unemployment, increased risk of poor health, depression and increased risk of other conditions like dementia, according to Associate Professor Robert Briggs. Cochlear clearly offers a very valuable service that can win a customer for life.
Cochlear’s Services business, representing 26% of sales revenue continues to grow, with Cochlear Family membership growing by 70% to exceed 100,000 members in 2018. Recurring revenue is useful for reliable cashflow.
However, with the company now trading at 44 times FY18’s earnings it is expensively priced. I wouldn’t mind buying some Cochlear shares for my portfolio, but I’d rather do it when it’s trading under 30 times earnings.
For now, if you’re looking for ASX shares with international earnings growth, there are two contenders revealed for free in the report below.
2 rapid ASX growth shares with rising international revenue
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