Cochlear Ltd

COH: XASX (AUS)

Morningstar Rating for Stocks	Fair Value	Economic Moat	Capital Allocation
	A$148.00	Fdxp	Msxtfjkl

Growth in Cochlear Implants Harder to Come By, Lower FVE to AUD 135

Jul 30, 2019

We lower our forecast revenue growth to 9.2% compounded to fiscal 2023 from 11.4% and consequently our fair value estimate for wide-moat Cochlear to AUD 135 from AUD 180. The growth outlook does not impact our wide moat rating where we see Cochlear retaining its dominant market position and few outside threats to the industry. But Cochlear screens as substantially overvalued at current levels. Our AUD 135 fair value estimate implies a fiscal 2020 free cash flow to enterprise value yield of 3.2% which aligns with other high quality international companies in the 3% to 4% range.

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