"lol out today at 61c, copped the loss, one mishap is a mistake,...

"lol out today at 61c, copped the loss, one mishap is a mistake, two... i think brand damage will be massively increased."

I went the other way; after spending the morning updating my financial model (which was only at DH19, which is when when I last owned the stock), I starting buying the stock yesterday afternoon.

The question is whether what has happened will permanently impact the perception of the business from people seeking fertility treatments or if it is an existential threat to the business, for example, in the form of a regulator denying MFV licence to operate.

If it's the latter, then obviously there is no investment case on offer. But I think there is negligible chance of this occurring because, while there could indeed be financial sanction and undertakings that will need to be made, I think the authorities would view this as no different to any other administrative shortcoming which occurs very infrequently, but is unavoidable, in health care settings.

So the salient question then becomes how bad the brand damage will be.
But, in isolation, that question is meaningless to investors because it needs to be framed in the context of what the stock is pricing in after its spectacular collapse.

Do this by reverse engineering the problem and asking:

"What sort of earnings collapse from brand harm is being priced in?"

Its a $215m Market Cap company and has around $75m of Net Debt, so the EV is $290m.

Now, looking at precedent to apply an appropriate EV/EBIT multiple, MVF's average EV/EBIT has been 11.4x, ranging quite widely from 9.5x to 13.5x.



Assuming the lower limit multiple will be the multiple applied by the market in 12 to 18 months' time, i.e., 9.5x, it implies a prospective EBIT of $290m/9.5 = $30m.

That's a 40% reduction on the $46m EBIT reported in LTM to December 2024.
Graphically, in half-years, that looks as follows compared to MVF's history:



I don't see that kind of earnings collapse eventuating.

Don't mistake me; this is not a fantastic business (not just because of current events, but because of the capital intensity and key clinical practitioner risk) but this episode reminds me very much of the market's irrational response (in 2017, I think, when some of MVF's Victoria fertility specialists jumped ship to the opposition, including on one of the group's star). The business actually ended up losing very little Revenue due to that perceived crisis.

I suspect that this time next year, all this media-grabbing headlines have been forgotten.

.