Is Medical Developments International the next ResMed?

Growing healthcare company Medical Developments International Limited (ASX:MVP) had a breakout FY19, but it still seems to be flying under many investors' radars.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

ResMed Inc (ASX: RMD) has grown exponentially over the last few years, and is now a large-cap company and one of the leading healthcare blue-chips trading on the ASX, alongside the likes of CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).

Long-term investors who bought shares in ResMed when it was valued at under $2.50 back in early 2012 would now be sitting on a gain of more than 800%. Just last month, ResMed shares set a new all-time high price of $20.75.

ResMed has grown from humble beginnings to become one of the leading brands worldwide in the treatment of sleep apnoea and other related respiratory conditions. And those few canny investors with the foresight to predict ResMed's incredible growth story are now sitting on a small fortune. However, another company – which so far seems to still be flying under the radar for many investors – could be poised to follow in ResMed's footsteps.

Medical Developments International Ltd (ASX: MVP) develops a range of medical devices and healthcare products for pain management as well as the treatment of asthma and other respiratory diseases. Its products are specifically targeted towards hospitals and emergency service professionals and include devices like masks, ventilators and resuscitation kits, as well as the trauma pain medication Penthrox. The company also manufacturers a similar range of devices, including asthma chambers and anaesthetic machines, for use in veterinary medicine.

Medical Developments International is a fast growing company and has reported some strong financial results recently. In fact, FY19 may even be looked back upon as the company's breakout year. It brought in a record $21.4 million in revenue, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 55% year-on-year to $3.4 million. But the real story from its results was the astronomical surge in the company's net profit after tax (NPAT), which skyrocketed 327% higher to a little over $1 million. This demonstrates how expansive profit margins can be for companies with specialised products and knowledge operating in the healthcare sector.

What is also evident from the annual report is how quickly Medical Developments International is expanding its global footprint. In FY19, sales in the UK increased by 68%, while for the rest of Europe sales were up by a whopping 401%, supported by the fact that the company now has regulatory approvals in 27 European countries. Plus, it also has regulatory approvals granted in Hong Kong, Saudi Arabia and Jordan, with regulatory submissions ongoing in other potentially lucrative markets including the USA, Iran, South Korea and Russia.

Foolish takeaway

While this may look like a pretty fantastic growth story on paper, Medical Developments International is still a small company when compared to peers in the healthcare industry like Cochlear, CSL and ResMed, and it will take some time before it can prove itself as a financially secure investment. The key risk to Medical Developments International – as is the case for any relatively new entrant into the healthcare sector – is that technological developments or scientific advancements may quickly render its devices, medications and treatments obsolete.

However, the fact that the company is quickly growing its global customer base does send the positive sign that medical professionals are investing a lot of faith in its products. Plus, the company has already shown that it can be profitable, which is also a reassuring sign for investors.

Overall, I think this makes Medical Developments International at least one to add to your watch lists for FY20. If it can continue to build on its successes, it could easily grow into the next healthcare blue chip.

Motley Fool contributor Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia has recommended Cochlear Ltd., Medical Developments International Limited, and ResMed Inc. 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.

More on Share Market News

A young man wearing a black and white striped t-shirt looks surprised.
Broker Notes

These ASX 200 shares could rise 25% to 80%

Analysts think big returns could be on offer from these shares.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were nervous this Friday, ending the week on a sour note.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Market News

Where to invest $5,000 into ASX 200 shares this month

The team at Bell Potter is bullish on these names. But why?

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
52-Week Highs

8 ASX 200 shares hitting multi-year highs today

These shares have defied the trend, hitting new price milestones amid a day in the red for the ASX 200.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why EOS, Evolution Mining, Renascor, and Woodside shares are jumping today

These shares are ending the week on a high. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Accent, Cettire, Ioneer, and Pro Medicus shares are dropping today

These shares are ending the week in the red. What's going on?

Read more »

A group of three miners in hard hats and high visibility vests confer at a rocky mining site.
Broker Notes

Up 66% in a year, just how much more upside does Macquarie tip for Perseus Mining shares?

Just how much higher might Perseus Mining shares soar? Here’s what Macquarie had to say about the ASX 200 gold…

Read more »