Nanosonics: Strong Start to Fiscal 2025; Shares Undervalued

We think recent earnings headwinds, such as hospital budgetary constraints, abnormally low ultrasound procedural volumes, and investment in its new product, are largely temporary. We forecast EBIT to grow at a five-year compound annual growth rate of 52% to AUD 71 million by fiscal 2029. We increase our fair value estimate by 5% to 4.20 for narrow-moat Nanosonics, largely due to the stronger US dollar. Shares in Nanosonics currently trade at roughly a 10% discount to our revised fair value estimate.