For this discussion I am going to discuss a company that has caught the interest of many a small cap investor over time, I will cover Nanosonics (ASX:NAN) following their latest report.
Background
NAN is a company focused on manufacturing sterilising medical equipment, more specifically ultrasound machines. Their flagship Trophon 2 product is a market leader and has been for some time.
Trophon, sterilises ultrasound probes without chemicals. It is about as big as a small microwave. And on top of selling the actual units, it also makes money selling the consumable part of the device, which contains a hydrogen peroxide solution which was developed by them.
In the latest annual report the company said it has 32.450 units installed globally, the majority of those in North America (87%). In the past 12 months this was an increase of 9%.
This latest result was a strong one for the company. Particularly in light of the developments in recent years - I will discuss those below in the “Investment Backstory” section.
The company grew global revenue by 38% to $166 million, with the all important North America division seeing a 41% jump. This is very important for a reason I will discuss in a moment. Reasons attributed to the result included increases in total units installed, increased consumables associated with the new installed base, increase in service revenue and favourable pricing and foreign exchange. All around a strong result.
The foreign exchange movements also aided margins which improved on last year significantly achieving its highest rate since FY19. Favourable consumable pricing also helped.
So whilst expenses rose they managed to achieve a rarity this reporting season by improving margins. Again, another reason for this exists and I will explain that in a moment.
The improvement in margins translated to an almighty profit lift over the past twelve months with the company achieving a record net profit after tax figure of $19.9M. Resulting in EPS growth of over +400%. Further, cash improved significantly over the period and the company has very low levels of debt.
With the company smashing it out of the ballpark in terms…
