Date of Data Capture: 21/6/2019
Name: MEDICAL DEVELOPMENTS INT LTD (MVP)
Current Price: $5.44
Market Capitalisation: $350 M
Forecast EBITDA Growth: 51.35%
Yield Estimate: 0.75%
Consensus Price Target: $5.96
# Covering Analysts: 2
Discount at Current Price: 9.56%
Price Target Trend (3-Month): Up-Flat +5.49%
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• Penthrox ‘Green Whistle’ producer MVP has had a volatile run since US FDA approval was put on hold, but with good international growth and very strong forecasting, we think they are set to recover and believe this is a buying opportunity.
• Softer earnings performance last year showed growing pains for MVP as it pushes forward with its strategy of global expansion, but this dip leads into strong growth forecasts out to 2021 on robust sales, margins and earnings gains.
• The 2018 downtrend ended early-2019 with a linear resistance break before price rallied into current range, testing structural resistance at $5.50, we expect the stock to enter a new longer-term uptrend with multi-timeframe momentum.
Support ($): 5.00, 4.75, 4.50, 4.25 & 4.00.
Resistance ($): 5.50, 6.00, 6.50, 7.00 & 8.00.
Growth Focus: MEDICAL DEVELOPMENTS INTERNATIONAL LTD (MVP)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
Even the most exciting growth stocks take the occasional hit – this can create buying opportunities in the right situations and we believe we have that here with Medical Developments, as the company moves into recovery.
Founded in Victoria 1971, MVP is a leading emergency medicine solutions company that manufactures and distributes pharmaceutical drugs along with medical and veterinary equipment. The company is best known for its well-regarded analgesia product Penthrox or the ‘Green Whistle’ which is non-opioid, non-addictive and inhaled to give strong and fast acting pain relief.
The company had a difficult last year, beset by the expenses and complications of aggressive global expansion, the company began to pull back from all-time highs reached in march 2018. The hits kept coming as US/FDA approval was delayed in July, followed by a capital raise within downtrend in August later that year. It was a hard fall for the previous high flyer, but it does create an opportunity if you think the broken stock is on the mend – and we do.
Performance was softer last year with expenditures increasing while sales and income growth were hampered by various trials and tribulations. These hardships overshadowed the significant gains that were made and the company continued to progress on a path to a stronger future. The US debut may still be on hold, but Penthrox was greenlit in additional 26 countries that year – up from 22 new markets the year before. If company forecasts are correct the current number of approved countries will increase from 38 to 77 by the end of 2020.
No matter what the scope of your growth prospects earnings matter, and with the clouds beginning to clear operationally we see forecasts rising aggressively out to 2022. That timeframe allows scope for the approved entrance into large markets like, China, Russia and the US, so robust growth should be expected. The company has also made advances in improving production efficiencies, which should add further strength to a strong recovery, with sales up 56%, revenue up 57% and gross margins up 32% YOY.
Pricing history reflects a previously strong leading stock that has fallen on hard times, but also one that is potentially about to emerge into a new long-term uptrend. The linear downtrend in place from March 2018 to March 2019 took the stock lower by more than 50%, before building base support and rallying up through resistance to pause under a $6 ceiling. Here we find them turning positive on all of our key timeframes and looking like an exceptionally high potential setup. If you are still hurting from missing the strong gains of 2017, MVP might just be about the help with the pain.