Which stocks are the best?

Last Updated: 5. November 2023By

The stock market is currently in correction mode. But after a strong first half year, such a pause is perfectly normal. Today I would like to look at a solid medical technology stock from Switzerland that has so far been able to detach itself from the correction.

Short profile Medacta Group is a medical technology company from Switzerland. It manufactures artificial joints and special surgical instruments and systems, which can keep the cutting field significantly smaller than with the usual joint replacement.

In addition, the NextAR technology, an innovative system with Augmented Reality (the combination of digital objects in a real environment) was introduced. This allows virtual information to be displayed directly in the glasses. It allows for comparably precise surgery as the competing robotic systems, but is significantly cheaper than these.

Strong first half year For the first half of the year, Medacta reported a sales increase of +21% to 255.1 million euros. This meant that business was much better than expected, the average analyst forecast was only 242.7 Swiss francs. No figures for profit were released.

According to Medacta, the increase is supported by all business areas and regions. Growth drivers were knee products with +28% to 98.5 million euros as well as the extremities business, which includes shoulder products, increasing sales by +39% to 17.9 million euros.

Raising annual forecast For the full year 2023, Medacta has raised its sales forecast. The company expects sales growth of between +15 and +18%, that’s a whopping five percentage points more than before.

Medacta should benefit from innovative new products in the second half of the year and in the coming years. With the NextAR technology, Medacta has already positioned itself in the future market of Augmented Reality. After the system was already in use in the USA, the first application in Japan took place in 2023.

In addition, MyKnee was used for the first time in the USA last year. This is a personalized interactive 3D planning before the operation and a set of 3D printed guide blocks. These templates are placed on the existing primary implant in the knee to guide the placement of new implants. This greatly simplifies one of the most difficult aspects of corrective operations: the recognition of anatomical reference points for the correct positioning of a new implant.

Share no longer a bargain Since the beginning of the year, the Medacta share has gained around a quarter in value, but is still about a quarter below the all-time high from 2021. The share is currently valued at five times the annual sales, which is slightly lower than most US competitors.

The price-earnings ratio (P/E ratio) of 37, however, looks somewhat more ambitious. However, one must take into account here that analysts expect increasing profit margins and thus the earnings growth should exceed the increases in sales in the coming years. For 2024, the P/E ratio already drops to 31. For long-term oriented investors, a closer look is certainly worthwhile.