A Hearing-Aid Stock Keeps Surging, But No Analyst Says to Buy

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(Bloomberg) -- Cochlear Ltd. has risen to a record, but none of the analysts covering the stock say it’s a buy.

The maker of hearing aids has been the second-best performing medical company in Australia in the past 12 months with a 39 percent advance. Still, Cochlear has no buy ratings, 8 holds and 3 sells, according to data compiled by Bloomberg. In fact, analysts expect the shares to fall 18 percent over the next 12 months.

What’s the problem here? It doesn’t seem to be earnings. The last time analysts published reports on the company was after it reported first-half results on Feb. 13 and those notes, for the most part, were pretty bullish.

JPMorgan Chase & Co. analyst David Low said “Cochlear is on track for a strong second half,” in a Feb. 13. Morgan Stanley analyst Sean Laaman said in a note the following day that the company has “strong business momentum.”

And the shares keep rising. Cochlear has gained 6 percent over the last three days. This is happening at a time when another health-care services provider, Healthscope Ltd., received a A$4.11 billion takeover offer from former dealmakers at Macquarie Group Ltd. and TPG Capital.

“The Healthscope takeover continues to give a bit more of a buzz,” Julia Lee, an equity strategist at Bell Direct Ltd., said by phone.

Ultimately, maybe the issue is valuations. Cochlear trades at almost 40 times 12-month forward earnings, more than a gauge of peers and almost three times the average for the benchmark S&P/ASX 200 Index.

“Cochlear is an excellent company, but it is one of the most expensive in the health-care space,” Lee said.

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