Snap up medical products outfit ConvaTec (CTEC) as a multi-year turnaround gains traction. Recent evidence for this came as the company raised full year guidance for the second time this year (2 August), delivering accelerated revenue growth in the six-month period to 30 June.

After a downward trend in the share price, the positive news has helped to turn the tide and we think this could be the precursor to further gains. CEO Karim Bitar, who was previously chief executive of animal genetics firm Genus (GNS), took over the reins at ConvaTec in 2019.

Bitar says: ‘We have now pivoted to sustainable revenue growth and are expanding our operating margin. We are increasingly confident of delivering sustainable future growth and an operating margin in the mid-20s.’

ConvaTec develops and sells products used to treat chronic conditions encompassing areas around wound care, ostomy care and continence. The company should be a beneficiary of structural growth in its end markets linked to ageing demographics but execution has been patchy in the past.

Under its current management this is beginning to change and there has been an effort to centralise its internal IT, finance and legal functions which should help improve profitability.

Having already upped organic revenue guidance in May 2023 to between 5% and 6.5% from 4.5% to 6% the company raised the bar again to a range of 6% to 7.5% and increased adjusted operating margin projections to ‘at least’ 20.5% from 19.7% previously.

The company increased the first-half dividend by 3% to $1.76 per share and ended the period with net debt of $1.29 billion, equivalent to 2.5 times earnings before tax, interest, depreciation, and amortisation, a measure of financial leverage.

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