Sigma Healthcare Ltd SIG

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A$1.27 −0.03 (2.32%)

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As of Apr 26, 2024 6:10am Delayed Price Closed

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Company Report

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Sigma Healthcare Earnings: Focusing on Cost Efficiencies and Private Label

Shane Ponraj Mar 22, 2024

We maintain our AUD 0.78 per share fair value estimate for no-moat Sigma Healthcare after its weak fiscal 2024 result. Underlying EBIT fell by nearly two thirds to AUD 23 million because of fewer covid test sales, cost inflation, and intense competition, broadly in line with our expectations. But we expect significantly better earnings in coming years due to improved operating leverage and a continued focus on cost efficiencies and private label products.

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Price vs Fair Value

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SIG is trading at a 66% premium.

Price

A$1.29

Apr 24, 2024

Fair Value

A$9.22

Dec 11, 2023

Uncertainty

Medium

1-Star Price: A$4.86
5-Star Price: A$7.44
Economic Moat: Syzfq
Capital Allocation: Vvjnnqnw

Bulls Say, Bears Say

Bulls

The initial loss of the PBS Chemist Warehouse contract forced Sigma to restructure its business and we see the company emerging in better shape after regaining it.

Bears

Sigma’s enterprise management software has not kept pace with the advances in the distribution facilities, as a result, not all the benefits of the investment in facilities are being realized. We expect the software upgrade to take three to five years to be fully implemented.

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News

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Australia's Sigma Healthcare agrees to megamerger with pharmacy chain CW

MarketWatch Dec 11, 2023 12:25am

Trading Information

Previous Close Price: A$1.30
Day Range: A$1.25–1.29
52-Week Range: A$0.61–1.35
Bid/Ask: A$1.27 / A$1.28
Market Cap: A$2.06 Bil
Volume/Avg: 4.0 Mil / 7.8 Mil

Key Statistics

Price/Earnings (Normalized): 71.95
Price/Sales: 0.38
Dividend Yield (Trailing): 0.76%
Dividend Yield (Forward): 0.77%
Total Yield: 0.76%

Company Profile

Sigma Healthcare is an Australian pharmaceutical distributor, wholesaler and pharmacy franchisor. The revenue growth prospects and returns of pharmaceutical distribution are subdued due to ongoing Pharmaceutical Benefits Scheme, or PBS, price reform, and regulated wholesale gross margins being capped at 7% for community pharmacy. As a result, Sigma and its competitors are seeking to expand into unregulated revenue streams. In addition, pharmacy ownership is restricted to pharmacists, thereby excluding direct corporate ownership and requiring exposure via a franchise business model.

Sector: Healthcare
Industry: Medical Distribution
Stock Style Box: Mid Growth
Total Number of Employees: 156
Website: https://www.sigmahealthcare.com.au

Competitors

Valuation

Metric	SIG	CAH	EBO
Price/Earnings (Normalized)	71.95	15.03	23.15
Price/Book Value	2.37	—	2.58
Price/Sales	0.38	0.12	0.48
Price/Cash Flow	30.88	10.71	17.90

Price/Earnings

SIG

CAH

EBO

Financial Strength

Metric	SIG	CAH	EBO
Quick Ratio	1.81	0.43	0.71
Current Ratio	2.46	0.98	1.24
Interest Coverage	1.42	18.37	5.05

Quick Ratio

SIG

CAH

EBO

Profitability

Metric	SIG	CAH	EBO
Return on Assets (Normalized)	0.68%	3.89%	4.19%
Return on Equity (Normalized)	1.35%	—	11.55%
Return on Invested Capital (Normalized)	2.12%	89.85%	8.77%

Return on Assets

SIG

CAH

EBO

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