The Cochlear Limited share price has been unstoppable this year – up nearly 30% since the beginning of 2021.
No announcements have been made by the company recently, so it seems sentiment has been building on the back of its most recent half-year results released in February.
COH share price
Cochlear background
Cochlear is a leader in implantable hearing solutions, with an approximate 60% share of the global cochlear implant market.
It also develops acoustic implants and generates income from services, including repairs and sound processor upgrades.
FY20 was a tough year for the company, which could partly explain why the share price languished for quite some time below its pre-COVID levels.
The company experienced a significant decline in implant surgeries across the US and Western Europe as hospitals had to prioritise their COVID responses.
Cochlear had to raise capital and it was additionally hit with a $416 million litigation expense due to a patent infringement lawsuit.
What’s driving the share price recently?
As previously mentioned, no announcements have been made recently which would explain the recent rally in the share price. It could be its half-year results that indicated trading conditions had been improving.
In particular, strong growth was seen in the US, Japan, Korea and China while slower growth was seen in emerging markets.
Sales declined 4% across the period to $742.8 million and the number of Cochlear implant units declined 8% to 17,377.
On an underlying basis, net profit declined 6% to $125.3 million, which was driven by lower operating expenses due to COVID-related savings.
On a more positive note, Cochlear’s dividend had been reintroduced, which was reflective of improving trading conditions.
Management is anticipating underlying net profit between $225 – $245 million for FY21 despite expecting some more short-term COVID impact as well as a strengthening Australian dollar.
Time to buy Cochlear shares?
Cochlear would easily be one of the higher quality larger-cap stocks on the ASX. Its scale advantages and competitive position are likely to provide a sustainable competitive advantage moving forward.
Prior to COVID, Cochlear had a great track record of growing its earnings and achieving a high level of Return on Equity (ROE explained).
For a typical ASX share portfolio, Cochlear could prove to be a sound addition.
For some more share ideas, click here to read: 3 ASX shares to add to your watchlist this week.
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