The Nanosonics Ltd (ASX: NAN) share price soared to all-time highs last week and this trend could continue following today's annual general meeting (AGM) update.
What was in the Nanosonics AGM update?
The AGM presentation revisited some news that had previously been announced in the company's FY19 results. This included figures such as a 39% increase in revenues, 201% increase in profit before tax and 18% increase in installed units.
Nanosonics reiterated the significant global market opportunity in ultrasound probe disinfection. The company currently has an approximate 17% global market penetration, supported by an increasing number of international guidelines requiring high level disinfection. Nanosonics has already become a standard of care in Australia and New Zealand, with approximately 75% market penetration, as well as a strong presence in the North American market with approximately 46% market penetration. However, the rest of the world remains a golden opportunity.
Expanding global presence
Geographical expansion is key to the company's strategic growth objectives.
Nanosonics has established new agreements with GE Healthcare for distribution in Denmark, Finland, Spain and Portugal effective February 2019, with existing agreements with GE Healthcare already in place in Sweden and Norway.
Japan has been a key player within the Asian region. In February 2019, a preliminary clinical study found that over 90% of probes were found to be contaminated and of the contaminated probes, over 50% were found to harbour potentially pathogenic bacteria. This has led to the establishment of Nanosonics Japan and a distribution agreement has been signed with a number of partners, including GE Healthcare Japan. Additional distribution agreements are currently in discussion.
Nanosonics is also undertaking market assessment activities in China with visits to large hospitals, the Chinese Centre for Disease Control and regulatory authorities. The company reports that a preliminary assessment indicates that there is a significant opportunity for Nanosonics in China.
Business outlook
There is a lot to look forward to in the Nanosonics growth story. The company expects continued growth in its installed base in North America, further adoption of trophon in Europe and further ongoing investment in Asia Pacific. FY20 profit is to be weighted to H2FY20 taking into consideration the phasing of trophon sales and timing of GE Healthcare distribution agreements.
Foolish takeaway
The problem for Nanosonics is that it is one of the most expensive growth stories in the ASX200. Its shares fetch an eyewatering price-to-earnings ratio of 180. But the fundamentals continue to go from strength to strength and it could eventually become the most dominant player in the ultrasound probe disinfection market. Momentum continues to build across North America and Europe, while the expansion in Asia Pacific is a major opportunity to bolster growth in FY20 and beyond.
The bottom line is, valuation will always be a problem for Nanosonics. Investors can choose to embrace the opportunity and let the quality of the company justify its valuation, or opt for something that is more aligned with your investment philosophy.
