With news that the COVID-19 virus has shut down more than 20,000 events worldwide, locked many people indoors, and caused a sell down in most commodity markets – it’s a near certainty that we will see recessionary economic growth levels for Q1 and Q2 2020.
This is causing share prices to fall at a rate that is nearly unprecedented.
However, one major stock has defied the selling, rallying while just about every other stock has been selling off.
Fisher & Paykel Healthcare Corporation Limited (FPH.ASX) is a manufacturer of healthcare products for use in respiratory care, as well as other healthcare markets.
With many COVID-19 patients requiring respirators to deal with some of the worst symptoms of the virus, such products have been in hot demand, and this is causing speculators to push FPH’s share price higher.
The company has stated that they “have seen an increase in demand globally and have ramped up our manufacturing output.”, also stating that “Our respiratory humidifiers and consumables are directly involved in treating patients with coronavirus”.
The company has upgraded its full-year profit guidance by $NZD 5-20 million, while also lifting its revenue forecast by around $NZD 40 million.
Since our ASX/S&P 200 index stated falling on the 21st of February, FPH has risen just under five percent, whilst the index has fallen nearly thirty percent over that time.
From a valuation perspective, FPH is trading at a fairly high level – its current year price to earnings ratio is more than three times the market average. Its current year dividend yield is less than a quarter of the ASX/S&P 200 dividend yield.
However, investors will be hoping that these metrics can be elevated by strong sales during these turbulent times, or at least that the earnings and dividends will hold up while those around them fall. At the very least, the stock appears a safer bet than many other businesses that will take a hit to earnings from the virus.
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