Is it too late to buy Nanosonics shares?

James Mickleboro | September 17, 2019 1:45pm | More on: NAN

Source: Company presentation

One of the best performers on the S&P/ASX 200 index this year has been the Nanosonics Ltd (ASX: NAN) share price.

Since the start of the year the infection control specialist’s shares have risen a staggering 120%.

Why is the Nanosonics share price up 120% in 2019?

The main catalyst for this impressive gain was the company’s performance in FY 2019.

In August the company arguably delivered the strongest full year result of earnings season when it posted record full year sales of $84.3 million and a record operating profit before tax of $16.8 million. This was a 39% increase and 120% jump, respectively, on the prior corresponding period.

The stellar sales result was driven by strong growth in both Capital revenue and Consumable and Service revenue. Over the 12 months the company’s Capital revenue increased 28% to $32.8 million and Consumables and Service revenue jumped 47% to $51.5 million.

The latter is a big reason why I think Nanosonics is one of the best growth shares on the local share market. The more disinfection systems that the company sells, the greater the Consumables and Service revenue becomes. This is because its systems require these specific consumable products in order to operate.

So, with the installed base of its trophon disinfection system continuing its solid growth in FY 2019, it bodes well for Consumables and Service revenue growth in FY 2020. During the 12 months the company’s global installed base reached 20,930 units, which was an 18% increase year on year.

Whilst this sounds like a very large base, it is still only a fraction of its 120,000 installed base opportunity. And given how the trophon product is regarded as the best in its class, I expect further market share gains will be made in the coming years.

In addition to this, new product launches look set to support the company’s growth in the near future.

After a substantial investment in new product development, important milestones were met in FY 2019 and the company is on the verge of releasing its first new product targeting an unmet need. Subject to regulatory approval, management is aiming to release it before the end of FY 2020.

Is it too late to invest?

Whilst Nanosonics’ shares are trading at a significant premium to the market average and carry a lot of risk, if you’re prepared to make a long-term investment then I would buy its shares today due to its outstanding long-term growth potential.

Overall, I think it is one of the best buy and hold options on the market along with CSL Limited (ASX: CSL), ResMed Inc. (ASX: RMD), and these top ASX shares.