The Cochlear Ltd (ASX:COH) share price has been on a rollercoaster ride in 2025, dropping 54.2% since the start of the year. This has left many investors wondering if it's time to add COH shares to their watchlist. While the recent decline is certainly concerning, I believe there are compelling reasons to consider investing in healthcare companies like Cochlear, especially in the current economic climate. In my opinion, the healthcare sector is a resilient and attractive investment opportunity, and Cochlear, as a global leader in hearing technology, is a prime example of why.
The Appeal of Healthcare Shares
Healthcare spending is essential, and it's one of the last areas people cut back on during tough economic times. This is what we call 'sticky' revenue, and it's a key reason why healthcare companies are a safe haven for investors. During the Global Financial Crisis (GFC), healthcare was the best-performing sector, and this trend is likely to continue as populations age and healthcare needs increase. Furthermore, the growing interest in 'ethical' and 'sustainable' investing is also boosting the healthcare sector, as these companies provide essential public services.
Growth Potential
Global healthcare spending is projected to grow significantly, with the US market accounting for over 40% of the total. Estimates for US growth are 7% per year from 2022 to 2027, reaching US$819 billion. Within the broad sector of healthcare, certain sub-sectors stand out for their additional growth potential. For example, healthcare IT, data solutions, and 'software-as-a-service' (SaaS) companies are forecast to grow their revenue at more than 15% per year from 2024 to 2030, a rate that would get most investors interested.
COH Share Price Valuation
As a growth company, one way to put a broad estimate on the COH share price could be to compare its price-to-sales multiple over time. Currently, Cochlear Ltd shares have a price-sales ratio of 3.50x, compared to its 5-year average of 9.18x, meaning its shares are trading below their historical average. This could mean that the share price has fallen, or sales have increased. In the case of COH, revenue has been growing over the last 3 years. However, it's important to remember that context is crucial, and this is just one valuation technique. Investment decisions can't just be based on one metric.
The Ethical Investor
A recent Morgan Stanley survey revealed that more than half of investors plan to increase their allocation to sustainable investments in 2024. With growing interest in 'ethical' and 'sustainable' investing, sectors like healthcare that provide essential public services are well-positioned to attract new capital and investors. Cochlear, with its mission to enhance the quality of life for individuals living with hearing-related conditions, is a prime example of a company that aligns with these values.
In conclusion, while the recent decline in the COH share price is concerning, I believe there are compelling reasons to consider investing in healthcare companies like Cochlear. The healthcare sector is a resilient and attractive investment opportunity, and Cochlear, as a global leader in hearing technology, is a prime example of why. Personally, I think that investors should keep an eye on the healthcare sector, especially those interested in 'ethical' and 'sustainable' investing. What makes this particularly fascinating is the potential for long-term growth and the positive impact on society. From my perspective, the healthcare sector is a safe haven for investors, and Cochlear is a company that is well-positioned to benefit from this trend.
