Somnomed Limited downgrades guidance: Is now the time to buy?

Somnomed Limited (ASX:SOM) is competing with ResMed Inc. (CHESS) (ASX:RMD) for growth in the sleep-disorder market.

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Somnomed Limited (ASX: SOM), a company which specialises in continuous open airway therapy (COAT) for the treatment of sleep-related breathing disorders, disappointed the market on Wednesday when it downgraded its full-year earnings guidance by a massive 50%.

Although the company still expects to sell 14,000 SomnoDent units this quarter, which would represent a new quarterly record, it no longer believes that it can achieve its previous target of 55,000 sales for the year.

The company downgraded guidance from 55,000 units to 50,000 units (still an annual growth rate of more than 17%), while earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to be $1 million, down from previous guidance of $2 million.

Pleasingly, Somnomed still expects revenues to grow by over 25% for the year to $32.5 million, which is unchanged from earlier forecasts.

Despite yesterday's update, the future is still looking bright for Somnomed. Its treatment products are somewhat cheaper and less invasive than those offered by other big-name companies like ResMed Inc. (CHESS) (ASX: RMD) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) and the company expects volumes to increase another 20% to 25% over the next year, while it is also exploring new ways to accelerate sales in the future.

At just $2.40 per share, Somnomed is certainly worth your attention.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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