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Why the SomnoMed share price is at a 52-week-high

Nikhil Gangaram
man in bed with cpap device for sleep apnea

The SomnoMed Limited (ASX: SOM) share price has closed the trading day at a 52-week-high, after surging nearly 6% in today’s trading session and closing at $3.23.  The company’s share price has made a spectacular recovery in the last 12 months and could be poised for further upside in 2020.

What does SomnoMed do?

SomonMed is a leading provider of treatment solutions for sleep-related breathing disorders. The company’s products and technology address various disorders including obstructive sleep apnoea, snoring and bruxism.

Traditional treatment of Obstructive Sleep Apnoea (OSA) involves either surgery or through devices that offer Continuous Positive Airway Pressure (CPAP). Somnomed has pioneered a wide range of clinically proven and researched oral appliances that treat OSA with Continuous Open Airway Therapy (COAT). This therapy is an alternative to other treatment options and has the competitive advantage of being more comfortable and less invasive.

According to SomnoMed, the global addressable market for OSA is approximately $7- $8 billion dollars and growing at a rate of 6% – 8% per annum. SomnoMed currently has operations in the Asia Pacifica Region, North America and Europe.

How SomnoMed performed in the past 12 months?

After struggling in recent years SomnoMed has begun a new journey in the past 12 months with the company overhauling its distribution and sales channels. This turnaround was reflected in the company’s share price which has surged nearly 92% in the past 12 months. Signs of recovery were also seen when SomnoMed reported earnings for the full year of FY19.

For the full year SomnoMed saw core business revenues grow 12% to $59 million for the year, whilst underlying EBITDA closed the year 27% higher with a profit of $5 million. For the full year, SomnoMed also saw good progress in overseas markets with sales growth in North America and a 13% revenue growth in Europe.

Outlook

Earlier this week SomnoMed reported its quarterly report for FY20. The report was highlighted by core revenue growth of 19% for the second quarter of $18.7 million. In addition, the company reported record revenue growth of 34% for its core business in Northern America for the three-month period. The European market also saw a 12% growth in revenue, whilst the Asia Pacific Region saw revenue growth of 9% for the second quarter.

SomnoMed recently launched a new signature product called SomnoDent Avant which acts as a digital device. Management is optimistic that this device will be a ‘game changer’ and allows the company to expand the digital segment and grow its market share as a leading oral appliance company.

For the full year of FY20, SomnoMed provided revenue guidance of between $67 and $69 million, equating to growth between 14% – 17%. EBITDA is also expected to grow between 26% and 34% for the full year to a range between $6.3 and $6.7 million.

The post Why the SomnoMed share price is at a 52-week-high appeared first on Motley Fool Australia.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020