The Nanosonics Ltd (ASX: NAN) share price has been a disappointing performer in 2021.
Since the start of the year, the infection control specialist's shares have fallen a sizeable 25%.
Is the Nanosonics share price in the zone now?
According to a note out of Goldman Sachs, its analysts aren't recommending investors jump in just yet.
A note out of the investment bank from last week reveals that its analysts currently have a neutral rating and $5.50 price target on Nanosonics' shares.
So with the Nanosonics share price currently fetching $6.18 on Tuesday afternoon, this implies potential downside of approximately 11%.
What did Goldman Sachs say?
Goldman Sachs was disappointed with Nanosonics' recent half year results. It notes that the company fell short of its expectations on both sales and earnings. The broker commented:
"H21 sales/earnings miss by -16%/-68%. Revenue declined 11% vs. Visible Alpha consensus' +5%, driven by a shortfall in both capital (-35% vs. consensus -5%) and consumables (-1% vs. consensus +4%). Although 2Q consumables growth improved +29% from 1Q, the growth rate slowed sharply in the last two months of the period, since growth had been tracking +4% YoY at the November trading update. Capital sales were impacted by a sharp reduction in purchases by key distributor GE Healthcare due to their own inventory management triggered by Covid-19 (previously flagged)."
Rising costs
Another concern the broker has is the company's decision to allow its costs to increase even when revenues are falling. It explained:
"Expenses continued to grow despite top-line pressure, driving EBIT/PBT to zero. Despite the 11% decline in revenue, the company continues to invest in its growth strategy, with 1H21 opex +8% YoY."
One positive, though, is that the company is well-placed to ride out the storm thanks to its strong cash balance. It notes:
"FCF was negative in the period at -$2.4m vs. +10m in the pcp, but the company is debt-free and cash still remains robust at $88m (vs. $92m in FY20)."
Furthermore, Goldman points out that management expects growth in revenue and profitability in the second half.
Positive broker
One broker that is a bit more positive on the company is UBS. In response to its half year results, the broker put a buy rating and $7.00 price target on its shares.
This price target implies potential upside of 13% for the Nanosonics share price over the next 12 months.
Time will tell which broker has made the correct call.
