This eyecare company is forecasted to grow its earnings by 19.2% next year.
Alcon Inc. (ALC)
From Power Growth Investor
Alcon (TSINetwork Rating: Extra Risk) is the world’s biggest eye-care company. Specifically, it’s the leader in ocular surgical supplies and No. 2 in contact lenses.
While Alcon is based in Switzerland, it’s headed by an American, reports results in U.S. dollars, and gets 44% of its sales in that market. It also generates 25% of its revenues from emerging markets, one of the highest percentages among competitors in the industry.
Independent since 2019, the company produces ophthalmic surgical devices under various brands; investors should note that this is a rapidly expanding and lucrative market driven by several growth factors:
- Aging baby boomers and the rising demand for cataract and vitreoretinal procedures. (The latter refers to any operation to treat eye problems involving the retina, macula, and vitreous fluid.)
- Increased access to eyecare in emerging markets, where the cataract surgery rate is currently about a quarter of the U.S. rate. Key markets are China, Brazil, and Russia—where greater affluence is leading to increased demand for cataract surgery.
Alcon also makes contact lenses and ocular health products, which includes dry-eye and red-eye treatments, and contact-lens care. Key growth drivers include: a consumer shift to disposable lenses from reusable lenses; and a significant population of undiagnosed dry-eye sufferers.
In the quarter ended March 31, 2021, Alcon’s revenue rose 4.8%, to $1.91 billion from $1.82 billion. Revenue was hurt by lower surgical and other sales due to COVID-19. However, that was offset by the company’s successful new product launches.
Per-share earnings in the first quarter rose 8.9%, to $0.49 from $0.45. Meanwhile, Alcon spends a high 10% of its sales on research, which makes it appear less profitable than it really is.
The company gives you two exciting ways to profit. First, it offers you exposure to rapidly expanding, worldwide demand for its contact lenses and cataract surgery products; and two, its global operations and technological leadership enhance the possibility of it attracting a lucrative takeover bid from a rival or a global health-care giant.
While COVID-19 continues to add uncertainty, this Power Buy taps into long-term key trends, like an aging population, greater wealth globally, and technological changes that make it hard for new entrants to gain significant market share. This all bodes well for the share price and investor returns.
Alcon is a Power Buy.
Patrick McKeough, Power Growth Investor, tsinetwork.ca, 888-292-0296, July 2021