The Nanosonics Ltd (ASX: NAN) share price is currently up 5% after giving a business update for the first four months of FY21.
About Nanosonics
As a reminder, Nanosonics describes itself as a leader in infection prevention solutions.
Its Trophon device disinfects ultrasound equipment to reduce the risk of patient cross contamination using a closed system which operates in a chamber featuring a sealed disinfectant cartridge. It releases a small and controlled dose of sonicated hydrogen peroxide mist to kill viruses, bacteria and fungi.
Nanosonics boasts that no external user intervention is required as everything happens inside trophon. There is no manual soaking or mixing of chemicals.
Here’s what Nanosonics said
The company reminded investors that a couple of months ago it said that in June FY20, global unit sales of consumables to customers had recovered back to 80% of the volume of what was seen in the first nine months of FY20 as hospital departments resumed. It also said that the number of new Trophon units installed in the fourth quarter was 46% lower.
However, in the first four months of FY21, consumable purchases were up 4% compared to the prior corresponding period (which was before COVID-19). It was up 25% compared to the last four months of FY20, being the hardest months of COVID-19 (so far?).
In the first four months of FY21, the number of new Trophon units installed was up 16% compared to the last four months of FY20. North America unit installs were up 14% and EMEA installs were up 64%.
Management comments
Nanosonics CEO Michael Kavanagh said that this update demonstrated “the ongoing strength in the underlying fundamentals of the business.”
“During the second wave of COVID-19 in North America, we have observed that hospitals in that region appear better equipped to manage the impact of the pandemic. Accordingly, ultrasound procedure volumes requiring high level disinfection did not seem to be impacted to the same degree as in the first wave. However, this does not guarantee that future waves will follow the same pattern in North America or other regions.”
Summary thoughts
Nanosonics is a quality business with an attractive product. Selling high-margin consumables is a good way to generate good profits over time. But Nanosonics has always seemed expensive to me on a price/earnings ratio basis, and I don’t know enough about its long term potential to say it’s worth buying today.
I’d much rather go for other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH) which look better value and are creating more operating leverage.
