Cochlear Limited (ASX: COH) is a global leader in the development of devices for hearing loss.
Cochlear implants, bone conduction implants and wireless accessories are the trusted hearing devices for more than 250,000 people throughout the world.
Successful investment in research and development initiatives has led to countless product rollouts across the globe, each time increasing sales revenues and profits for shareholders. Cochlear shares have achieved an average annual total return (share price gains plus dividends) of 11.6% over the past decade, despite a significant product recall in late 2011.
However, although Cochlear continues to fire on all cylinders in local and global markets, the future outlook for the company is promising. Sales growth in the Americas and EMEA (Europe, Middle East and Africa) regions account for an overwhelming 83% of sales. Meanwhile, just 17% of group revenue comes from Asia Pacific, a region with enormous potential.
Much like an iPhone from Apple, consumers in emerging markets have proven their willingness to pay the highest prices for the best products, and I highly doubt their desire to purchase quality healthcare products will be any different. China's healthcare spending alone is tipped to reach $US1 trillion in the next six years, as its growing middle class population and consumption spend continues to balloon.
According to data from the World Health Organisation, deafness and hearing loss affects 360 million people globally with one in three over 65 affected. Cochlear estimates the penetration of this enormous market is less than 5%.
Is it a bargain?
Today, Cochlear shares traded as much as 1% higher, at $85.35, following its AGM presentation in Sydney. The company said its first quarter performance was on track with internal forecasts. It confirmed its full year net profit guidance of between $165 million and $175 million.
By my calculations that places Cochlear shares on a forward price-earnings ratio of 28x, which I believe is reasonable for a long-term growth stock of its calibre. In my opinion, along with its peers such as ResMed Inc. (CHESS) (ASX: RMD) and CSL Limited (ASX: CSL), Cochlear is a worthy long-term investment at today's prices.
