Cochlear Limited’s (ASX: COH) stock is riding higher thanks to the U.S. FDA’s regulatory approval of its Nucleus 7 Sound Processor.
The stock has risen 7% since news broke of the approval and is up 33% overall this year.
The Nucleus 7 Sound Processor is expected to be an advancement on the Nuclear 6 in that it is optimized for use with iOS and iPhone apps. Its telecoil is also optimized for loops.
The newly-approved sound processors will support Hybrid hearing, offer remote control and provide a remote assistant that helps users locate lost processors.
Analysts are forecasting another year of double-digit growth for Cochlear. The company’s services business, which provides recurring revenue, is expected to continue growing as well as its core auditory implants business.
Cochlear shares jumped to a 52-week high on June 14, with share prices hitting a high of $155.30. At that point, investors had seen a 26% return year-to-date on the stock.
During an investor day in May, the company’s management team reiterated its full-year guidance on earnings. Cochlear projects earnings of between $210 million and $225 million, an increase of 10% to 20% compared to last year.
Over the last year, Cochlear Limited has generated a return on equity (ROE) of 45.7%, which means the company generated 45.7 cents for every dollar shareholders invested. By comparison, Cochlear’s industry delivered an ROE of 22.56%.
Cochlear’s future may continue to look bright, as the global hearing aids market is expected to grow to $8,739.9 million by 2020, up from $6,183.3 million in 2015. The market is projected to grow at a CAGR of 6.3% between 2015 and 2020.
Adult and pediatric users account for most of the market growth, but the adult market will account for the largest share of the market. Aging and subsequent hearing loss will increase demand for hearing aids, contributing to growth in the market.
A separate report shows that the Active Implantable Medical Devices Market will exceed $26.75 billion by 2022 art 7.8% CAGR during the period.
Driving factors for growth, according to the report, include cardiovascular disease, which leads to neurological disorders; advancements in the industry; and expanded applications of neurotransmitters.
Continued growth in the market may help Cochlear extend its impressive growth streak. The company has competitive and tailwinds advantages, which may help it outperform the market for the foreseeable future.
But at nearly $160 a share, the stock is selling at 37x estimates by analysts for FY 2018.