Opinions
Brett Girard, CPA, CA, CFA
Coloplast A/S
CLPBY-OTC
TOP PICK
Jan 13, 2020
Stock price when the opinion was issued
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It is a Danish company which is a global leader in ostomy care and continence care, and third largest in wound care. It has done two big acquisitions. It has had some weakness in 2023 but should grow through good M&A and good R&D. It has had an 11% dividend growth rate per year and 12% share growth rate per year. Buy 9 Hold 15 Sell 3
(Analysts’ price target is $841.23)Everyone is on the AI-hype train. But you still have the long-term demographic of aging populations. Likes the ROIC at 14% compared to WACC at 7%. Has cashflow to make tuck-in acquisitions. You get organic revenue growth plus revenue growth from the acquisitions, and this will grow the business over time and compound. The 8th wonder of the world is time plus compounding.
Medical device industry has been slow since Covid, as everything shut down and surgeries cancelled. With rising rates, customers de-stocked inventory rather than buying more. Demand starting to pick up, so they can raise prices. Exceptionally cheap for a company that can grow 15% a year.
A challenging year, partly due to slowdown in China. Many products are used after elective surgeries; overhang from Covid has slowed those surgeries. Long-term, the demand is there. Past 10 years, dividend's grown ~11% a year and shares have risen by ~12% a year.
Healthcare will see a big turnaround over the next 1-3 years. He's buying now for clients.
Free cash flow is still rising, and revenue growth remains 6-8% which allows acquisitions and in turn lifts earnings. Debt payments reduce debt, good. They grow 2-3x faster than GDP. Colostomy bags and bandages will remain in demand. Shares will rebound. He's owned this a long time and will keep buying.
Big market with the aging population. Very cheap. FCF this year is up about 15%. Revenues are growing about 6%, compared to 2% for global GDP. ROIC is 13%, WACC is 6%. Tariffs are not helping. New CEO.
Don't think about the price, think about the company. Stock price only matters on the day you buy it and the day you sell it. Everything in between is noise. Since Covid, medical device companies have had a rough go. Elective surgeries have slowed down, hospital funding is stretched.