Dale Seweryn
Trader – FX, Equities & Indices.
Cantel Medical Corp. – A healthy option for your portfolio?
A brief overview
Cantel Medical Corp. is a provider of infection prevention products and services in the healthcare market. The Company’s operating segments include Endoscopy; Water Purification and Filtration; Healthcare Disposables, and Dialysis. Its Endoscopy segment includes medical device reprocessing systems, disinfectants, detergents and other supplies. The Company’s Water Purification and Filtration segment includes water purification equipment and services, filtration and separation products, and disinfectant, sterilization and decontamination products and services. Its Healthcare Disposables segment includes single-use, infection prevention and control healthcare products. The Company’s Dialysis segment includes medical device reprocessing systems, sterilant/disinfectants, dialysate concentrates and other supplies for renal dialysis. The Company offers a range of filters utilizing hollow fiber membrane technology.
Technicals
From the below chart we can see there has been a sharp drop off in price since May 2018 highs of $130 after a slowdown in revenue growth. The share price has begun to consolidate around the $65 mark although we could see the stock fall to the $55 support level. I can see the share price returning to the $80-$90 longer term should the company continue it’s growth trend. We can see there has been small price spikes to the $90 resistance from oversold areas over the past 6 months. From a technical point of view, I will be waiting for further confirmation before entering a position at this level.
Source: IG
Fundamentals
What I really like to see when purchasing a stock is growth in all areas. We can see from the below graphic we are increasing net income/ total equity and cash from operating activities. All pointing towards growth story.
Source: IG
The PE ratio is in line with the sector average (above 30) but higher than the market average of 17.8. Based on estimates from analysts we could see a 27.2% increase in annual earnings growth which is expected to exceed the American market performance. The intrinsic value based on future cash flows is showing as slightly undervalued pointing towards a potential move to the upside. Holders of this stock will receive an annual dividend income of 0.3%, although this is nothing to write home about as this falls lower than the bottom 25% of dividend payers in the USA.
Source: Simply Wall St
The debt story of Cantel Medical is a mildly positive one with the debt level currently sitting at 37% compared to total net worth, however debt has increased over the past 5 years from 21.8%.
Source: Simply Wall St
In conclusion, this is a stock that I do not intend to act on immediately, however I will be keeping a close eye on. If we see a move to the downside and find support at the $55 level providing a more favourable risk to reward.
Thank you for taking the time to read this article, I look forward to providing further content in the future.
Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in this newsletter is not a specific buy or sell recommendation and is presented solely for informational purposes only. Not to be taken as financial advice.
