When we think of technologically advanced companies the ones that come to mind are often ones based in North America. However, Australia also has a group of companies creating futuristic products – particularly in the healthcare industry.
The two companies I'm going to talk about below aren't very well known unlike CSL Limited (ASX: CSL) or Cochlear Limited (ASX: COH), but they have a much bigger chance of high growth over the next few years.
The following two stocks could give you healthy returns:
Nanosonics Ltd. (ASX: NAN)
Nanosonics is a provider of hospital disinfectant medical devices called Trophon, it has a market capitalisation of $965 million. Its products are approved for sale in many countries including the US, Canada, Europe, Australia, New Zealand, Hong Kong, Singapore, Japan and South Korea.
Management reported an exciting FY16 for the company. Sales rose by 93%, net profit after tax was a positive figure for the first time at $122,000 and cashflow was also positive for the first time at $1.9 million.
There is large potential for Nanosonics to grow because so far only 8,700 devices are installed in the USA. Management thinks that there is potential for around 40,000 devices in the USA. There is scope for 40,000 units to be installed in Europe and the rest of the world too.
Nanosonics is one of the more speculative stocks on the ASX, but it has a lot of potential. Nanosonics doesn't pay a dividend yet and it's trading at 56x FY17's estimated earnings.
Sirtex Medical Limited (ASX: SRX)
Sirtex is a liver cancer treatment specialist company with a market capitalisation of $1.5 billion. It has a variety of treatments that are at various stages of development, some are at the trial stage whereas others are just being researched.
Last week they announced a new project called the Histone Inhibition Program, it may potentially be a treatment for sepsis which is a "life threatening inflammatory response to infection that has spread throughout the body".
Sirtex is exciting because any of its projects could turn into huge revenue earners for the business. But on the flipside if its projects are deemed not to work, or a competitor develops a better treatment, all the research and development will be for nothing.
It has managed to deliver double-digit volume growth, revenue and profit growth over the last few years. Not only that, during FY16 it grew its dividend by 50%.
Sirtex is currently trading at 22x FY17's estimated earnings with a partially franked dividend yield of 1.1%
Foolish takeaway
I wouldn't suggest having most of your portfolio invested in either of these companies, but their long term potential is compelling. Particularly as both of them are now cashflow positive and making profits after tax.
I think both companies are worth a small position in a Foolish portfolio, though investors must be long term holders to see out the development and roll out of the products on offer.
