One of the best performers on the S&P/ASX 200 index this year has been the Nanosonics Ltd (ASX: NAN) share price.
The infection control and decontamination products company's shares have rocketed an incredible 127% higher since the start of the year.
This makes it the fourth-best performer on the benchmark index behind Pro Medicus Limited (ASX: PME), Afterpay Touch Group Ltd (ASX: APT), and Fortescue Metals Group Limited (ASX: FMG).
Why is the Nanosonics share price up 127% this year?
Investors have been scrambling to get hold of the company's shares this year following the release of a strong half year result in February and an even stronger full year result in August.
In respect to the latter, last month Nanosonics posted record full year sales of $84.3 million and a record operating profit before tax of $16.8 million. This was a 39% and 120% increase, respectively, on the prior corresponding period.
This was driven by a combination of strong growth in both Capital revenue and Consumable and Service revenue.
Solid demand for its trophon EPR ultrasound disinfection system led to Capital revenue increasing 28% to $32.8 million in FY 2019. Over the 12 months the company's global installed base reached 20,930 units, which was an 18% increase year on year.
Whereas, Consumables and Service revenue jumped an impressive 47% to $51.5 million. This was driven largely by the increase in its global installed base. This is because the more disinfection systems that the company sells, the greater its Consumables and Service revenue becomes as the systems require these specific consumable products in order to operate.
Also getting investors excited was management confirming that the first of its secretive new products is on schedule to be released by the end of FY 2020, pending regulatory approval. Little is known of these new products other than they are targeting unmet needs in the same industry.
But if they are half as successful as its ultrasound disinfection system, then they could support solid sales and earnings growth for a long time to come.
Should you invest?
Whilst Nanosonics' shares are undoubtedly expensive and high risk due to the significant amount of future growth that has been built into them, I still believe they could provide outsized returns for investors over the next decade thanks to the trophon product's strong growth potential and the release of these new products.
Though, it is worth noting that due to the premium they trade on, they may only be suitable for investors with a high tolerance for risk.
