Stock pick: Amplifon SpA

Amplifon SpA is one of the best company quoted in Milan. AMP.MI is a 6 bn euros company listed on the Milan Stock Exchange, here you can see how it performed in the past five years.

Behind this perfomance there is a solid rock company with good revenues and a even better business. I want to show you why this firm will outperform in the upcoming years from a secular trend in Italy and across Europe.

One of the key fact in Italy is the secular decline in birth rate along with higher expectations of life. Here are some data from the ISTAT, the statistics office of Italy.

The trend is not improving currently, but as we can denote this is a worldwide trend in major developed countries.

Therefore, the healthcare sector is the place to be in if we take a look at this long term trend. In addition, aging population equals physical problems/deficits: loss of hearing is going to be one of the most common one, and I will let you guess what Amplifon does.

Here the company profile:

From a product point of view and geographical exposure it is for sure in the right market and right region. But how the management performed in the past years? I use the three main measures in the image and I would say that I am satisfied with the results they generated along with what they expect to do in the upcoming years (mainly consolidation in the sector, through some acquisitions, and expansion in other markets).

With regards to numbers from the balance sheet we can see here the main measures:

Solid revenue growth and a EBITDA margin that is estimated to be above 18% in the next five years. But what is really important is the amount of cash is expected to be generated, simply magnificent, it will double within few years giving the management the possibility of acquisitions as well as pursuing multiple projects.

Here is the breakdown of sales by region:

Here you have the capital structure:

Lastly, some valuation:

Currently the stock is underpriced, I would like to buy it on negative days to jump on the long term trend.

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