Virtus Health Ltd shares fall 3%: should investors be concerned?

IVF demand should ensure profitability grows over time for Virtus Health Ltd (ASX:VRT).

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published October 30, 2014 7:33 am AEDT

Virtus Health Ltd (ASX: VRT) shares fell 4.5% in early trade on Wednesday, ending the day down 3% at $7.50. The stock is down 7% from its recent high of $8 and 20% off its 12-month high of $9.20.

What happened?

Precisely nothing. Apart from there being a couple of negative articles in the press recently over the IVF industry. Aside from that, this appears to be Mr Market at work.

Should investors be concerned?

There will be days when Mr Market offers you a great company for a cheaper price. I believe that yesterday was one of those days. Virtus Health only listed recently but offers an attractive entry point into the growing IVF market.

Virtus, along with Monash IVF Group Ltd (ASX: MVF) and Primary Health Care Limited (ASX: PRY) are three good options in the local IVF market and should all benefit from the long-term trend towards couples having children later in life.

Interestingly, Monash and Virtus shares fell on Wednesday, while Primary's rose. Market analysts believe that Primary's bulk-billed IVF service will strip some demand away from Monash and Virtus, however, I believe the superior and complimentary services offered by the two premium services will ensure they retain the majority of clients.

The biggest problem with investing in healthcare companies can be the ongoing capital requirements. Surgery units need to be fitted out and kept up to date, staff need to be trained, and premises bought. I'm a big fan of capital-light businesses that require little debt and offer massive operating leverage.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.