Cochlear (ASX:COH) is still a long term growth story you should listen to

Cochlear is one of few stocks that has created immense shareholder value and has also greatly improved the lives of its users. Yes, this can be said with respect to many ASX health stocks, but this one can hang its hat on its societal impacts more than most other companies.

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Who is Cochlear?

Cochlear (ASX:COH) is an Australian hearing device maker. Its mission is to “Help people hear and be heard, empower people to connect with others and live a full life and help transform the way people understand and treat hearing loss” achieved through innovation and bringing to market a range of implantable hearing solutions that deliver a lifetime of hearing outcomes.

Graeme Clark, the original inventor of Cochlear devices, was a practicing ear, nose and throat surgeon in Australia and the UK. His interest was first prompted because his father was hearing impaired.

By 1970, Scots College-educated Clark had started research on research related to the hearing nerves in the human cochlea, or inner ear, and the possibility of electronically stimulating those nerve ends to help deaf people hear. He bought to market a device considering these principles…and the rest is history.

It is crucial to note that Cochlear implants are not conventional hearing aids. All hearing aids do is amplify sounds so they can be detected by damaged ears, but this company’s implants bypass damaged portions altogether and directly stimulate the auditory nerve.

Cochlear is now a company with a market capitalisation of over $17bn and over $2.3bn in annual sales. Its sales were made across 180 countries, resulted in a a 60% global market share.

FY25 Earnings

Cochlear has 3 main business segments that contribute to its revenue. ~60% comes from Cochlear implant systems, 30% from processor upgrades and accessories and 11% from Acoustics Bone conduction systems and sound processor upgrades.

Cochlear’s revenue was $2.4bn, of which $1.5bn came from implants and this was up 11%. The Services division contribured $609.2m, a figure down 12 months ago. This was due to fewer people upgrading their hearing devices to the newest model, Nucleus 8.

This is the first smart cochlear implant with upgradeable firmware, enabling feature improvements post‑implantation (without surgery or perhaps even a specialist visit) as well as self-monitoring diagnostics. This system represents a significant technological advance and is expected to drive adoption in developed markets. In a high inflation environment, customers could be for thinking it is a ‘nice to have’ rather than a need to have. Of course devices will need to be upgraded eventually.

Ultimately, 53,968 units were shipped, up 12% in a year and Cochlear’s management had told investors that these would deliver a net societal benefit of over $9bn across the lifetime of these recipients. Moreover, management has promised revenue would recover, guiding to a net profit of $435-460m for FY26.

From an ESG perspective, the company boasted to have reduced Scope 1 and 2 emissions by 71% since FY19 and has reached 99% renewable energy across all its facilities.

Is there growth left?

We believe that there remains further opportunity for Cochlear to continue its so far successful growth strategy expanding into underpenetrated markets and the launch of its new acoustic implants that is supported by a growing market.

The company has been able to achieve 80% market penetration to its customer base of children in developed markets (130,000 people) leaving little room for growth there. However, across adults and senior customers in developed markets the estimated addressable market is over 6 million customers, which is currently only 3% penetrated.

Of course, even for the company it is, penetrating the market will be easier said than done. Just because people could benefit from Cochlear’s devices, doesn’t mean they’ll be taken up with the click of a finger. Awareness, screening, funding, and access barriers remain high in many regions.

Expansion programs aimed at education, professional training, and local healthcare partnerships are part of Cochlear’s strategy to grow these markets. Even if growth is slow, this could help the Services division return to growth which is one of investors’ key concerns.

Of course, an aging global population and rising prevalence of age‑related hearing loss further drive demand. Many individuals who previously relied on hearing aids or lived with untreated loss may increasingly be referred to implant solutions, broadening Cochlear’s market. Better screening techniques for at-risk patients could also help the company’s cause, identifying people as needed for implants before the need becomes blatantly obvious.

Cochlear will need to invest heavily into R&D and it already spends 12-13% of sales. Future innovations could include advanced electrode coatings to improve long-term performance and reduce tissue response, improvements in signal processing including AI-driven sound coding techniques that enhance hearing in noisy environments and personalise outcomes as well as bone-conduction and fully implantable systems.

Conclusion

Analysts have a target price on the stock of $303.38, up 16% from the current price. Consensus estimates for FY26 call for $2.6bn revenue and $6.04 EPS (which would suggest just 2% bottom line growth) but for $2.9bn revenue and $7.54 EPS for FY27. Its multiples are 24.5x EV/EBITDA, 38x P/E and 2.8x PEG.

Cochlear is not the cheapest company by any means, but we believe is one of those companies that has room for growth and is an opportunity not just because of its growth potential but also because investors think it has no further room for growth.