Cochlear Limited (ASX: COH) has this morning announced that its long-serving Chief Executive Officer and President, Dr Chris Roberts, will stand down from his role and will be replaced by Mr Chris Smith later in the year. The stock traded marginally lower early in the session.
Management is a key element to any company's success, and investors will likely wonder what effect Dr Roberts' departure will have on the business.
Roberts has served as CEO and President of Cochlear since 1 February 2014 and has had a positive impact on the company in that time. Indeed, the company's net profit and share price have more than quadrupled under his leadership, while he has also firmed Cochlear's position as the global leader in implantable hearing solutions.
After having discussed succession planning "for some time", the Board has established that Mr Smith is an appropriate replacement for Dr Roberts. Indeed, he has accrued more than a decade of executive experience at Cochlear and is currently serving as the President of Cochlear's North American division, Senior Vice President of Cochlear Bone Anchored Solutions and Senior Vice President of Global Support Operations.
To allow for a smooth transition, Smith will become Deputy CEO as of 1 July 2015, before Dr Roberts departs the business as at the end of August 2015. Roberts said: "I have worked closely with Mr Smith for more than a decade. I know that he has a deep commitment to the company, our people and our recipients and healthcare professional partners."
He also added that: "The company is well placed to grow and continue bringing the gift of hearing to many more people around the world."
Should you buy?
Cochlear is a high-quality business whose earnings are expected to continue growing strongly over the coming years, largely thanks to an aging population in regions such as China. However, the stock is by no means 'cheap' – especially after its recent run-up in price – and is trading on a price-earnings ratio of 31x this financial year's forecast earnings.
