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Invacare Still Rolling
Invacare (NYSE:IVC), a relatively small Ohio company that manufactures wheelchairs and other home medical products, posted strong earnings October 23 for the third quarter ended in September. In a difficult overall earnings environment, the home medical equipment maker posted solid sales increases. The company maintains prospects for the coming year will continue to be strong despite the troubling global economic conditions, which are expected to adversely affect nearly every industry.
Profits On Target: When Not Looking Bad Is Good
Net sales for the quarter rose from $407.3 million in Q3 2007 to $461.8 million, a 13.4% increase. Net income was $11.7 million, up from $11.6 million in Q3 2007, or essentially a flat 36 cents per share. Adjusted earnings, excluding the impact of restructuring and one-time charges, were up to $13.4 million versus $10.8 million a year ago, or 42 cents vs. 34 cents per share.
Even assuming the stricter figures and flat earnings, in the face of the widespread earnings shortfalls that so many companies have reported, the 36 cents per share (which matches last year's Q3) is a respectable outcome. Given the number of S&P 500 companies that reported earnings by October 24, a Thomson Reuters estimate suggests that the average profit will have fallen 11% from last year.
Wheelchairs And More
Invacare is best known for manufacturing wheelchairs, but it also makes a wide array of other home medical equipment and devices. These include home-care beds, respiratory and sleep products, diabetic products, ostomy and wound care products, and other continuing care products. According to data supplied by Yahoo Finance, the company has a market cap of $542.7 million, sells at a P/E ratio of 19.4 and has traded the past year between $15.62 and $27.75 a share. (Speaking of P/E ratios, don't miss Is The P/E Ratio A Good Market-Timing Indicator?)
Two of Invacare's competitors, Stryker (NYSE:SYK) and Hill-Rom Holdings (NYSE:HRC), have a market cap of $21.1 billion and $1.5 billion, respectively, while Invacare has forged a strong niche in the home medical care sector and has penetrated global markets, extending to nearly all of Europe and Asia.
Furthermore, Invacare has a more precise focus than these two competitors and other larger competitors, such as the behemoth Medtronic (NYSE:MDT), which carries a $44.8 billion market cap and has a much less concentrated array of products. Invacare is able to compete strongly in the chronic, continuing care field and sells almost solely to home medical equipment providers. (Speaking of market cap, check out Determining What Market Cap Suits Your Style.)
Going Forward: Growth Expected In A Non-Growth Economy
Although the company's business is subject to government regulations in every country in which it operates, the prospects for growth, both immediate and long-term, are sound. Home medical healthcare demand should remain strong despite the projected ongoing weakness in the global economy.
Analysts anticipate EPS for the full year of $1.35 a share, which would be up from 2007's $1.12, a 21% increase, with a long-term growth rate pegged at more than 15%. Even if demand softens from an ongoing global recession, the home-care medical equipment industry should thrive, as there is a two-fold factor of need. First, medical care is not a discretionary item, particularly in chronic care; and second, the developed world's population is advancing in age, particularly in the U.S. where baby boomers continue to age and enter the years where medical care is most needed.
Solid, Long-Term Opportunity
Couple Invacare's solid earnings progress in the face of increasing economic headwinds with its favorable positioning in the home medical equipment sector, add that the underlying strength of the industry should remain strong even in the face of economic recession, along with the ready-made growing demographic pool available for increasing its long-term customer base, and you have a company whose stock is seriously worth looking at.
Profits On Target: When Not Looking Bad Is Good
Net sales for the quarter rose from $407.3 million in Q3 2007 to $461.8 million, a 13.4% increase. Net income was $11.7 million, up from $11.6 million in Q3 2007, or essentially a flat 36 cents per share. Adjusted earnings, excluding the impact of restructuring and one-time charges, were up to $13.4 million versus $10.8 million a year ago, or 42 cents vs. 34 cents per share.
Even assuming the stricter figures and flat earnings, in the face of the widespread earnings shortfalls that so many companies have reported, the 36 cents per share (which matches last year's Q3) is a respectable outcome. Given the number of S&P 500 companies that reported earnings by October 24, a Thomson Reuters estimate suggests that the average profit will have fallen 11% from last year.
Wheelchairs And More
Invacare is best known for manufacturing wheelchairs, but it also makes a wide array of other home medical equipment and devices. These include home-care beds, respiratory and sleep products, diabetic products, ostomy and wound care products, and other continuing care products. According to data supplied by Yahoo Finance, the company has a market cap of $542.7 million, sells at a P/E ratio of 19.4 and has traded the past year between $15.62 and $27.75 a share. (Speaking of P/E ratios, don't miss Is The P/E Ratio A Good Market-Timing Indicator?)
Furthermore, Invacare has a more precise focus than these two competitors and other larger competitors, such as the behemoth Medtronic (NYSE:MDT), which carries a $44.8 billion market cap and has a much less concentrated array of products. Invacare is able to compete strongly in the chronic, continuing care field and sells almost solely to home medical equipment providers. (Speaking of market cap, check out Determining What Market Cap Suits Your Style.)
Going Forward: Growth Expected In A Non-Growth Economy
Although the company's business is subject to government regulations in every country in which it operates, the prospects for growth, both immediate and long-term, are sound. Home medical healthcare demand should remain strong despite the projected ongoing weakness in the global economy.
Analysts anticipate EPS for the full year of $1.35 a share, which would be up from 2007's $1.12, a 21% increase, with a long-term growth rate pegged at more than 15%. Even if demand softens from an ongoing global recession, the home-care medical equipment industry should thrive, as there is a two-fold factor of need. First, medical care is not a discretionary item, particularly in chronic care; and second, the developed world's population is advancing in age, particularly in the U.S. where baby boomers continue to age and enter the years where medical care is most needed.
Solid, Long-Term Opportunity
Couple Invacare's solid earnings progress in the face of increasing economic headwinds with its favorable positioning in the home medical equipment sector, add that the underlying strength of the industry should remain strong even in the face of economic recession, along with the ready-made growing demographic pool available for increasing its long-term customer base, and you have a company whose stock is seriously worth looking at.
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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