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Despite the shares plunging 20% today, I think this growing firm is attractive

When a share price plunges more than 20% in one day, usually one of two things is going on. It could be because something has changed to damage the underlying business irreparably, or it could be news that implies a short-term setback

The short-term setbacks can be decent opportunities to hop aboard an otherwise sound growth story and I think that could be what we are seeing today with Consort Medical  (LSE: CSRT), whose investors are nursing a 20%-plus share-price reversal today on the release of the half-year results.

Temporary challenges?

The company is a contract developer and manufacturer of drugs and drug delivery devices and partners with pharmaceutical businesses to design, develop and manufacture “high-performance” medical devices for inhaled, injectable, nasal and ocular drug delivery, and point-of-care diagnostics products. It also makes active pharmaceutical ingredients (APIs) and finished dose drugs “to the highest quality standards.”

Let’s get the bad news out of the way first. Today’s report reveals that partner-firm Mylan has experienced a delay in the approval of its Wixela (generic Advair) inhaler programme, which has led to its inventory of Consort Medical’s devices building up, so Mylan won’t be buying from Consort in the short term.

Consort’s chief executive, Jonathan Glenn said in the report he expects the situation to knock down profit before tax for the current year by £3m compared to the director’s earlier forecast. To put that in perspective, the firm reported profit before tax of just over £38m for the full year to April 2018, so today’s news represents a significant miss on earnings, but not a catastrophic one. Mr Glenn said his “view of the peak sales opportunity for the product remains unchanged.”

Meanwhile, today’s figures are pretty good. In the first half of the firm’s trading year, underlying revenue at constant currency rates eased back 0.7% year-on-year, profit before tax moved just over 6% higher and adjusted earnings per share rose almost 7%. The outlook is positive and the directors expressed their confidence in the firm’s prospects by pushing up the interim dividend by 2.2%.

Growth story intact

Despite the challenges in the Wixela programme, Consort reported progress in most other operational areas today. The firm’s two operating divisions are Bespak, which handles drug delivery devices and delivered 62% of last year’s operating profit before special items, and Aesica, which makes drugs and accounted for the remaining 38%. Mainland Europe is important to the company and provided 65% of last year’s revenue, 15% came from the US, 9% from the UK and 11% from the rest of the world.

Looking forward, Jonathan Glenn said the firm’s strategy focusses on organic opportunities and research and development will drive “strong long-term growth.” The firm also plans to assess acquisition opportunities that deliver additional growth and “a broader offering through access to new geographic markets and complementary technologies and capabilities.”

Today’s weakness in the share price looks like an opportunity to me. I think the growth story remains intact and the share is well worth your research time now.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.