The Sirtex Medical Limited (ASX: SRX) share price has dropped more than 5% today to trade around $34.30, despite the health care company declaring a record interim profit.
Sirtex is primarily known for manufacturing and distributing Sir-Spheres, a radioactive product designed to combat liver cancer. In the six months to December 2015, global dose sales increased 15.7% to 5,728 units, resulting in revenues of $112.6 million.
Across the board, this was a stellar result by any definition.
Revenues up 4%, net profit up 46.9% to $25.9 million, earnings per share up 45% to 45.4 cents and the company keeps spitting out cash – with the cash balance surging 33% to $73.7 million. Margins are also growing at a rate of knots, with net profit margin up to 23% from 21.9% in the last year.
Perhaps the only real disappointment was operating cash flow, which increased only marginally compared to the first half of the 2015 financial year.
Income-seeking investors hoping for a dividend were also likely disappointed no dividend was announced – but that is consistent with previous years. More than likely, Sirtex will pay a single dividend when it reports in August this year – like it did last year.
CEO Gilman Wong said in the announcement, "I am pleased with our record first half profit result, which reflects the significant progress we have made in continuing to grow the business. The first half result is consistent with our dose sales objectives for the full financial year."
So what?
It seems the market wanted more or higher growth, given Sirtex is trading on a trailing P/E ratio of 48x, and previous historical growth in dose sales and earnings.
However, ignoring the market reaction for now and focusing on the results alone suggests this was a strong first half result.
What now for Sirtex?
The company appears well set to report solid growth for the full 2016 financial year – and beyond. Sirtex says it expects the full year growth rate of dose sales to be at least in line with its compound annual growth rate over five years at 19.7% [emphasis mine].
Sirtex also has a number of trials and clinical programs underway, with the primary goal of proving that Sir-Spheres can be used as a front-line weapon against liver cancer, rather than at a later stage.
The current share price dip may be an opportunity for long-term focused investors.
