It has been an extraordinary couple of years for this small health care company but can it keep going?
Source: https://www.google.com/finance
About Paragon Care
Over the past few years Paragon Care has progressively acquired businesses in the healthcare sector to become a leading provider of medical equipment, devices and consumables for the Australian and New Zealand healthcare market.
Paragon has targeted high growth markets driven by Australia’s ageing population, rising consumer expectations and increasing government spending.
Paragon operates in a highly fragmented industry, characterised by a high proportion of smaller, privately owned businesses which has allowed it to acquire 13 businesses over the last 7 years at so far reasonable prices.
Paragon aims to differentiate itself from other suppliers by increasing scale aims to significantly reduce the administrative burden experienced by hospitals and other health care providers when procuring items.
Paragons latest results
Latest Trading Update
Conclusion
Simple extrapolation of the last 9 months and inclusion of the latest trading update for the full financial year has Paragon sitting on a PE or approximately 13.25 which in my opinion is hardly demanding for a company in a growing market such as health care. There has been concern around changes the medicare subsidizes but any impact will have less an effect on providers of consumable as compared to imaging providers.
So far shareholders have benefited from sensible acquisitions as most investors know roll up companies are only as good as the companies they buy and the price they pay. While Paragon has done well so far that does not guarantee the same will happen in the future and as such investors need to watch and assess each new acquisition carefully.
Tips for New Investors
Small companies embarking on roll up strategies can make great investments if you get in early and they get their acquisitions right . I have learned to be wary of companies that try to expand too quickly and take on too much debt which can cause problems if economic or market conditions impact on their cash flow and intern their ability to service the debt.
Disclosure:
Please Note: None of the above should be considered investment advice. These are my own opinions based on a number of years market experience. Please do your own research and consult a qualified financial advisor if you wish to invest.