Company Reports

Coloplast posted fiscal first-quarter results that featured robust organic revenue growth as well as ongoing margin pressure. On the whole, quarterly results largely met our expectations, and our minor model adjustments weren’t enough to materially shift our fair value estimate. Favorable market reaction to new intermittent catheter Luja as well as Kerecis fish skin underscores Coloplast’s intangible assets that support its wide economic moat. Though the shares have risen over the last three months, we think Coloplast remains modestly undervalued.

Coloplast wrapped up its fiscal year with a strong performance in the fourth quarter, but management's outlook for fiscal 2024, which assumed ongoing cost pressures would keep operating margin below the firm's historical benchmark of 30%, caused shares to fall by 7%. We're leaving our DKK 962 unchanged, as the firm's full-year results hewed closely to our estimates, and our projections for fiscal 2024 remain bound by management's guidance. We continue to hold measured expectations for operating margin to return to the 30% level in fiscal year 2026. However, progress in commercializing new platforms in ostomy and continence care, such as Heylo for early leak detection in ostomy and the Luja catheter that demonstrably leaves less retained urine that is conducive to the development of urinary tract infection, underscore our confidence in Coloplast's wide economic moat.

Though foreign-exchange headwinds have nagged at Coloplast, underlying demand remains robust and revenue growth remains on track to meet our full-year projections. We’re holding steady on our assumptions and leaving our fair value estimate for the Danish shares unchanged. However, we're raising our ADR fair value estimate to $14.10 from $13.30 to reflect current foreign-exchange rates. Importantly, we have upgraded our economic moat rating to wide from narrow on the strength of Coloplast's returns and consistent ability to deliver innovation that drives returns on invested capital far above its cost of capital. Having studied Coloplast for over a decade now, we think it can maintain its intangible assets and switching costs to generate economic profits over the 20-year period that characterizes a wide economic moat. For this firm, it comes down to a particular focus on end users and ability to introduce meaningful design improvements, even after patents expire.

Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has made inroads into the concentrated urology and fragmented woundcare markets, but it remains a peripheral player there. In contrast, Coloplast has a long record of consistent and meaningful innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. After shifting the majority of its production to Hungary, China, and Costa Rica, Coloplast now enjoys a gross margin that beats that of rival Convatec by more than 1,500 basis points. Currently, Coloplast is altering its emphasis to enhance growth by entering new geographies, with an emphasis on the United States.

Narrow-moat Coloplast posted fiscal second-quarter results that keep it on track to meet our full-year expectations, and we’re leaving our fair value estimate unchanged. The firm continues to shake off lingering effects of the pandemic, especially in China, where recently lifted lockdown measures have begun to allow for more patient volume and growth in advanced woundcare. However, the higher inflation environment also means the firm is still juggling higher materials, freight, and energy costs. Further, management said wage inflation in Hungary has been running in the double digits. All of these factors as well as the initial startup costs of new manufacturing in Costa Rica and trends in foreign exchange leave us cautious about the firm’s goal of returning to 30% operating margin by fiscal 2024. We currently assume that those higher manufacturing costs won’t abate until fiscal 2025.

Narrow-moat Coloplast kicked off its new fiscal year in strong fashion, despite diminishing ripple effects from the pandemic, and we’re leaving our fair value estimate unchanged. Quarterly organic revenue growth of 7% year over year was closer to what we’d consider typical for the firm. In particular, ostomy and continence care were up 8% and 7%, respectively. The last lingering effects of COVID-19 showed up in softness in China as the country navigated the rise of the omicron variant and shortages of input materials, especially for silicone products, which have hindered the continence care and wound care business. We expect these two dynamics will be ironed out over the next quarter or two.

Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has made inroads into the concentrated urology and fragmented wound-care markets, but it remains a peripheral player there. In contrast, Coloplast has a long track record of consistent and meaningful innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. As a result of shifting the majority of its production to Hungary and China, Coloplast now enjoys a gross margin that beats that of rival ConvaTec by more than 1,300 basis points. Currently, Coloplast is altering its emphasis to enhance growth by entering new geographies,with an emphasis on the U.S.

Coloplast wrapped up its fiscal year very close to our full-year projections, and we’re leaving our fair value estimate unchanged. Aided by favorable foreign currency tailwinds, Coloplast’s reported fiscal fourth-quarter revenue grew by 9% (which also includes the addition of the Atos Medical acquisition), though organic growth was more muted at 6%, which is a touch lower than the 7% to 9% organic growth that Coloplast seeks over the long term. On the whole, full-year ostomy and continence care growth matched our estimates, while urology slightly outpaced and wound care slight trailed our expectations. We think the strength in interventional urology likely reflects resumption of normal growth along with additional topspin in the form of patients who had delayed care and are now seeking it. We remain confident in Coloplast’s narrow economic moat that is built on both switching costs and intangible assets. As we’ve discussed before, Coloplast has a particular end-patient focus that is more akin to the approach of consumer goods companies rather than medical supplies companies. For instance, the recent launch of the MyOstomyLife app complements the sensitive and high-touch personal support that Coloplast offers to ostomy patients during that post-operative adjustment period. This app brings that kind of support one step closer to patients.

Coloplast posted strong fiscal third-quarter results that demonstrated some recovery from the COVID-19 surge that had hampered performance in the previous quarter. The firm remains on track to meet our full-year expectations, and after making minor adjustments for foreign exchange tailwinds and our projections for the newly acquired Atos Medical business, we’re leaving our fair value estimate intact. The firm has largely seen growth in new patients return to prepandemic levels across the majority of its geographic markets, with the notable exception of China. The integration of Atos has been relatively seamless thus far and underscores our confidence in Coloplast’s impressive operations. Further, the addition of this range of voice and respiratory care devices offers Coloplast new markets in which it can flex its ability to introduce thoughtful innovation, in our view. We think this situation reinforces the firm’s narrow economic moat.

Coloplast delivered fiscal second-quarter results that featured progress toward normalized, prepandemic dynamics in the U.S. However, the omicron variant and ongoing lockdowns in China have put slight crimp into management’s expectations for the year. Nonetheless, the chronic care business remains largely steady, and we’re standing behind our fair value estimate as we saw little in the quarter to change our estimates for the full year. Coloplast continues to launch new products that lead to long adoption cycles, which gives us confidence that the firm’s intangible assets supporting its narrow economic moat remain in good shape.

Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has made inroads into the concentrated urology and fragmented wound-care markets, but it remains a peripheral player there. In contrast, Coloplast has a long track record of consistent and meaningful innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. As a result of shifting the majority of its production to Hungary and China, Coloplast now enjoys a gross margin that beats that of rival ConvaTec by 1,600 basis points. Currently, Coloplast is altering its emphasis to enhance growth by entering new geographies,with an emphasis on the U.S.

Coloplast posted respectable fiscal first-quarter results that fell slightly short of its long-term revenue growth and margin goals but hit our projections nearly on the nose. Accordingly, we’re holding steady on our fair value estimate of DKK 933 per share. While surges in COVID-19 continue to put near-term pressure on Coloplast and underlying nonpandemic procedure volume, we’ve seen little to suggest that the company's narrow economic moat has developed any cracks. Coloplast remains a powerful innovator in thoughtful, patient-friendly product development for ostomy and continence care, which forms the basis of its intangible assets.

Coloplast closed its fiscal year hitting our full-year projections nearly on the nose, and we’re leaving our fair value estimate unchanged. Though the first half of fiscal 2020-21 was more seriously hindered by the pandemic and fewer new patients, Coloplast posted impressive results in the fiscal fourth quarter, featuring 10% constant-currency revenue growth year over year, which outpaced the 8% that management typically aims for (although management's outlook was tempered to 7% top-line constant-currency growth for 2020-21). Similarly, Coloplast has enjoyed relative stability in its cost structure, even when viral transmission put more pressure on nonpandemic surgical procedures in calendar 2020. We remain confident in the firm’s switching costs and intangible assets that support its narrow economic moat. Investments in higher-volume manufacturing facilities in Costa Rica position the firm well to hold down manufacturing costs through the longer term, from our perspective.

Despite considerable foreign exchange headwinds, Coloplast posted laudable fiscal third-quarter results that featured strength in interventional urology and wound care as non-pandemic procedures resumed. The firm remains closely on track with our expectations for the year on the top and bottom lines, and we’re leaving our fair value estimate unchanged. Coloplast has benefited from its chronic care businesses, including ostomy and continence care, which were relatively less affected by the pandemic through 2020. Similar to the insulin pump and continuous glucose monitor markets, ostomy and continence care played the role of ballast for Coloplast, while steep declines were seen in the smaller wound care and urology segments when shelter-at-home orders were place last year. Now that trend has been reversing itself in 2021. With the rising transmission of the Delta variant, we think there may be some peripheral pressure on elective procedures through the rest of this calendar year. But, the impact on Coloplast valuation is likely to remain immaterial. Additionally, we think Coloplast’s narrow moat remains solid through the disruption of COVID-19. The firm continues to leverage its patient-focused culture and create meaningful innovation, thereby solidifying its competitive advantage. We have yet to see rival ConvaTec exert much competitive pressure on Coloplast.

In addition to significant foreign exchange headwinds in fiscal second quarter, Coloplast also faced anemic demand thanks to the pandemic--an atypical situation for this firm. However, we anticipate growth should accelerate in the second half of the year as COVID-19 recedes and non-pandemic surgical procedures recover, and we remain comfortable with our valuation, especially considering Coloplast’s firm grip on expenses. Despite these external factors pressing down on Coloplast’s business, we see little to shift our thinking on the firm’s narrow economic moat. Despite the disruption in patient flow and surgical procedures, Coloplast is focused on what it does best--thoughtful innovation and supporting end-patients and customers.

Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has made inroads into the concentrated urology and fragmented wound-care markets, but it remains a peripheral player there. We think Coloplast has dug itself a narrow moat thanks to consistent innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. As a result of shifting the majority of its production to Hungary and China, Coloplast now enjoys a gross margin that beats that of rival ConvaTec by 1,600 basis points. Currently, Coloplast is altering its emphasis to enhance growth by entering new geographies,with an emphasis on the U.S.

Narrow-moat Coloplast posted fiscal first-quarter results that displayed underlying resiliency with organic growth consistent with our projections, and we’re standing pat on our fair value estimate. However, the falling U.S. dollar and British pound damped revenue growth more than we’d expect, though not enough to materially shift our intrinsic value. Our projections on the top and bottom lines remain within the bounds of management’s outlook, and we haven’t altered our underlying assumptions for the business in 2021.

Coloplast posted fiscal fourth-quarter results that featured softer growth thanks to the pandemic, though the firm hit our full-year estimates nearly on the nose, so we’re holding steady on our fair value estimate. Ostomy and continence care (the two largest segments that account for more than 75% of total revenue) saw fourth-quarter organic growth of 3% and 4%, respectively, roughly half the normal growth rates. Further, a solid currency translation headwind added to the consolidated reported 1% top-line decline in the quarter. Nonetheless, we remain confident in Coloplast’s narrow economic moat and the company's ability to continue introducing meaningful innovation.

Coloplast posted fiscal third-quarter results that underscored the strength of the firm’s footprint in chronic care, which is largely resistant to the COVID-19 crisis. After making minor adjustments to our expectations for fiscal 2020, we’re leaving our fair value estimate unchanged. This quarter offered a stark contrast between the firm’s relatively small interventional urology business, which is far more exposed to elective procedures that have been delayed due to the pandemic, and the ostomy and continence care segments that saw relatively less impact from COVID-19. Despite Coloplast’s slower growth in the second half of fiscal 2020, we remain confident the firm’s narrow economic moat remains intact.

Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has made inroads into the concentrated urology and fragmented wound-care markets, but it remains a peripheral player there. We think Coloplast has dug itself a narrow moat thanks to consistent innovation in ostomy and continence care that has led to a dominant position in Europe. Since 2008, the firm has done an admirable job of trimming its cost structure as it focused on profitable growth. As a result of shifting the majority of its production to Hungary and China, Coloplast now enjoys a gross margin that beats that of rival ConvaTec by 1,600 basis points. Currently, Coloplast is altering its emphasis to enhance growth by entering new geographies and taking advantage of cross-selling opportunities.