Inspiration Healthcare’s share price chart would bring doctors running if it flashed up on monitors in the hospitals where its intensive care products are used. From 68p in 2020, the firm, which specialises in neonatal medical machines and aids, saw its stock more than double in the following 12 months before crashing back down to 84p over distribution issues in China last November and halving again to 45p now.
It’s either an ideal time to snap up a bargain in this Crawley-based medtech distributor — or it’s a dud that was overvalued in the Covid years, when its ventilators saw high demand from the NHS. Which is correct?
Inspiration was founded in 2003, and listed on Aim in 2015 via a reverse takeover of Inditherm, which specialises in technology that warms up very sick patients. Today, Inspiration’s key products include the all-in-one SLE6000 ventilator, non-invasive ventilators for babies and cerebral function monitoring systems; the firm sells its own UK-made products in 75 countries, generating 60 per cent of profits from overseas. Its neonatal market specialism is seeing growing demand: more than 15 million babies are born prematurely every year, but that figure is rising worldwide. The neonatal intensive care market is worth $6.8 billion and set to approach $10 billion by 2027, according to analysts ResearchandMarkets.com.
Yet Inspiration’s own trends have not reflected that opportunity. Results for the year to February were muted, with revenues almost flat at £41 million and underlying earnings falling from £6 million a year earlier to £4 million. Chief executive Neil Campbell said the firm had shown “resilience”, a barrel-scraper of a verdict.
There are reasons for cheer: Inspiration invested in a new manufacturing and technology centre in Croydon, increasing both its capacity and capability. It has reliable, high-quality customers, and revenues picked up in the fourth quarter of its last financial year, and amounted to almost £2 million cash in the first two months of its 2024 year. Its policy of investing about 9per cent of sales into R&D should gradually pay off.
Seb Jantet, analyst at house broker Liberum, is realistic: “the recent track record and poor cash generation warrant some caution,” he says, but names a punchy 100p target price because “Inspiration’s core offering is sound and … we expect the discount to peers to close.”
The price to earnings ratio is 9.6 for 2023, down from over 12 last year. Inspiration is a dicey investment, but its medical technology’s time has come: buy.
