The shares of infection control specialist Nanosonics Ltd. (ASX: NAN) have been an early mover this week. In morning trade its shares have climbed 5.5% to $3.10 after the release of an impressive quarterly update.
That update revealed that sales in the quarter ending 31 December 2016 came in at a record $18.3 million, bringing half-year sales to $36.1 million. This meant that sales in the half grew a massive 131% on the prior corresponding period.
Pleasingly Nanosonics was cash flow positive for a fourth consecutive quarter. Cash on hand increased by $3.3 million to $56.9 million by the end of the quarter.
The lucrative North American market has yet again been key to this explosive growth. Its environmentally friendly ultrasound probe disinfection system saw its installed base in the market grow by 60% to 10,700 units.
But it's not just North America providing growth. The company has made progress in the United Kingdom as well. Six of the 14 Scottish NHS trusts have commenced the adoption of its technology since new guidelines in Scotland were announced. Overall the company's global installed base now totals approximately 12,300 units.
I can't say I'm surprised by this growth. The company's trophon EPR system is wholly effective at disinfecting ultrasound probes, whereas current toxic disinfectants being used are largely ineffective. I believe this gives it a competitive advantage in this small, but lucrative market.
Although at 51x estimated FY 2017's earnings its shares do look a little on the expensive side compared to other healthcare shares such as CSL Limited (ASX: CSL), I believe that there is still significant growth potential in North America and Europe that justifies the premium.
I feel Nanosonics would be a great long-term buy and hold investment, although due to the premium its shares trade at I would suggest investors restrict it to just a small part of their portfolio.
