Anyone catch Kohler's interview with Dr Chris Roberts, the Cochlear CEO, on Inside Business yesterday? I was out so I've only seen a news report this morning, but it suggests that Cochlear is looking to grow its footprint in China and other emerging markets?
McCoy Pauley said:Anyone catch Kohler's interview with Dr Chris Roberts, the Cochlear CEO, on Inside Business yesterday? I was out so I've only seen a news report this morning, but it suggests that Cochlear is looking to grow its footprint in China and other emerging markets?
I'd never seen Roberts before but he came across as a bit old fashioned, or a bit off the pace.
Can anyone explain why COH dived in early Feb?
On top of Advanced Bionics getting their act together it looks like the Chinese are now making implants for half the price.
http://www.businessweek.com/articles/2013-03-28/a-chinese-hearing-implant-takes-aim-at-cochlear
When you are the market leader in a growing market with nice fat margins other businesses will want a piece of that action.
Big surprise it looks like the analysts still can't reach a consensus.
http://zolmax.com/cochlear-given-outperform-rating-at-sanford-c-bernstein-coh/52442/
Share price down almost 3% today, the future should be interesting for Cochlear.
It's heading to 45 IMO. Looks to be in a corrective wave c after completing five waves and a wave a and b.
CSL also looks like it could be entering a prolonged down turn after completing a long term wave 5.
I don't see the COH share price weakness as being the result of a few cheap knock-offs out of Asia. The implied growth in the SP doesn't match the reality of the business and that's why the price is coming off.
You could be right McLovin probably the hardest thing to predict is future growth, how much it will compound and for how long. Given Cochlear's history of growth they deserve a place in my portfolio. Maybe just maybe the growth will continue.
AB claims 10-15% industry growth. Given COH's size, it's hard to see them growing above industry. So then the question is are they worth 23x earnings?
Just looking at the dividends if they can increase by 10% a year for the next ten years they will be paying around $6.35 annually if they can stretch it to 15% you are looking at around $9.50. Ten years is a long time but the chance for this sort of growth is worth holding a business of this quality in my opinion.
| Earnings | P/E | Year |
| 2.77 | 23.83 | 0 |
| 3.05 | 21.66 | 1 |
| 3.35 | 19.69 | 2 |
| 3.69 | 17.90 | 3 |
| 4.06 | 16.27 | 4 |
| 4.46 | 14.79 | 5 |
Just looking at the dividends if they can increase by 10% a year for the next ten years they will be paying around $6.35 annually if they can stretch it to 15% you are looking at around $9.50. Ten years is a long time but the chance for this sort of growth is worth holding a business of this quality in my opinion.
Growing profits by 10% for ten years in a row is a huge ask....
And if you assume the same 10% profit growth (from last years' earnings of $2.77/share and current price of $66) you're looking at:
Earnings P/E Year 2.77 23.83 0 3.05 21.66 1 3.35 19.69 2 3.69 17.90 3 4.06 16.27 4 4.46 14.79 5
I know it's an overly simplistic view, but it hardly seems like you're getting value for money at the current share price. Assuming things go perfectly (~10% growth) you've still got a stock trading at almost 20*P/E two years on! (on today's SP)
And as for the 10% growth, I share McLovin's views on size and growth rates...
That might turn out to be the case but it assumes that the market that has existed for the last 10 years continues for the next 10. With increased competition, even if they can maintain 10% growth at the top line it may not translate to 10% growth at the bottom line, and is unlikely to flow through to 10% dividend growth. And even if they can achieve that, what's the value of a $6.35 dividend in 2023 in today's money? If dividends are your strategy then just buy TLS today which is pretty close grossed up yield wise to what COH will be in 10 years time. A bird in the hand etc.
Thank you chops_a_must, having no understanding of technical analysis myself it is good to get your view. Here is another view from The Motley Fool's Mike King.
http://www.fool.com.au/2013/04/02/is-now-the-time-to-buy-cochlear/
As I have posted in this thread I would become interested again if the sp heads towards $55.00 but until then it is a hold and watch from me.
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