Ive not had enough time to fully read the latest announcement yet, but despite a great increase in NPAT to $524.2m, up 82% yoy, the share price is tumbling.
I suspect this might be because in the announcement was the suggestion that post COVID19, the hospitals might not use the products anymore. The demand may drop and they might not redeploy the units into other parts of the hospital, which means no recurring revenue from consumable product sales. This statement infers that revenue might go back to pre COVID19 levels.
What’s worse is that revenue in other areas has dropped due to hospitals directing spending elsewhere.
All this might mean that despite growth of 82% this year compared to last, revenue post COVID19 could be less than before COVID19 started.
If I’ve read that correctly (and as I said at the start, I’ve just skimmed the announcement), this could explain the share price drop despite an amazing result.
Addendum: Back of a napkin estimate shows that we could see the price drop to between $22 – $24, based on the price 2 years ago, adding normal growth and dividend value. Working the price of FPH shares is always difficult because they are eternally expensive, so market sentiment wipes out any logic that I can apply to a return on investment based valuation. Additionally, the bond price landscape could also affect the price of this stock if others see it as a bond proxy. Finally, COVID19 projections and monetary policy long term projection will also affect the price in the coming year, which is hard to place with any surety.
I’ll just take FPH off my buy list for now, but I’ll hold through this drop because I don’t think they’ll drop below 30% on the year. Also I want to own FPH in my retirement portfolio, which means I’d have to buy back at a lower price, which might make me an investor in the taxman’s eyes.