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The bull side is that its in an industry that has historically, and esp over past few
decades, had great pricing power. General healthcare industry has a great inelastic
demand. This companies been around since 1800s. They serve US and Europe.
Overall developed world is aging. They are trading at a low valuation with a 11p/e
and offer a great dividend yield of 6% and a price to book at 1.03. Current price is
$17.
One way to answer this I assume is to look at the acquisitions they have made in
past couple years and there new strategy of 2 business units.
I think this is likely a good way to position against disruptor's coming into
healthcare. By providing the value added services that a firm with this
experience,depth, and relationships can pull off. And then on the product side,
focusing not so much on hospital trays but products that are more complex due to
seriousness of the product and likely regulation.
One thing that is bothersome, esp given uncertainty of topline and gross, is its
debt/equity, but they should be ok with a current ratio of 1.6 esp if they can turn
over there inventory and AR. I will assume they will come out of this – and while
some healthcare may get disrupted, overall the pie is going to grow. Doing the
logic of a price/book of 1, albeit they have some intangibles, the market is not
giving them any credit for future earnings potential. While the company has some
head wins, compared to the market at a 27 multiple, I think this is a decent play at
this price.