Trading update: Here's why the SomnoMed share price is falling today

SomonMed Limited (ASX: SOM) is under pressure after a customer folded.

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The SomonMed Limited (ASX: SOM) share price tumbled 5% to $1.76 this morning after the sleep apnea treatment business warned a major customer in the USA had collapsed and still owes it US$805,000.

SomnoMed's management admitted there's a "reasonable likelihood" it cannot recover an amount between US$400,000 and US$805,000 which would represent a significant chunk of its forecasted EBITDA between $5 million to $5.5 million for fiscal 2019.

SomnoMed reported that the Texas-based distributor of its products closed down because the economic viability of its business worsened due to changes in "regulations and reimbursement amounts".

The financial hit to SomnoMed is not the end of the world assuming it is a one-off, but the effective closure of a distributor in the U.S.could signal more trouble ahead for investors.

SomnoMed shares are now down around 45% over the past year as this former small-cap market darling shows how small changes in business performance can produce big share price swings.

Another medical device small cap for investors going the other way is Nanosonics Ltd (ASX: NAN), especially after it just revealed strong revenue and profit growth for the half-year ending December 31 2018.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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