It will hardly come as a surprise to many that shares in Ansell Limited (ASX: ANN) have surged 63% since they bottomed out at $21.43 in March. The manufacturer of personal protective equipment (PPE) and healthcare products is one of only a handful of S&P/ASX200 Index (ASX:XJO) companies that have benefited from the challenging COVID-19 environment.

Having seen Ansell’s share price reach an all-time high of $35.07 earlier today, many prospective investors may be wondering if they’ve missed this buying opportunity.

Here are a few reasons I believe the Ansell share price may have its best days ahead yet. 

Unprecedented demand for healthcare products

The operations of manufacturing companies are currently being strained to meet unprecedented global demand for healthcare safety products. Reflecting this trend, on 3 March the World Health Organization (WHO) called on governments and industry to increase manufacturing by 40% to adequately meet demand for medical equipment. Based on WHO modelling, it is estimated that a mammoth 76 million disposable gloves will be required each month for the foreseeable future as an essential part of the global COVID-19 response.

In its business update to the market on 30 March, Ansell confirmed it had upscaled its production of hand and body protection products, including single and multi-use surgical gloves. Healthcare production normally accounts for 52% of total company revenue. However, this figure is set to increase as demand for industrial products (48% of total revenue) weakens due to coronavirus factory closures. The company commented:

The Ansell teams are working tirelessly to maximize output including making selective investments in new capacity and by leveraging manufacturing locations that are not affected and we expect to be able to continue to ship large quantities of product to key markets.

The market has undoubtedly priced the current demand for PPE into the Ansell share price. Despite this, I believe the sheer volume of demand for its healthcare products will allow the company to outperform market expectations when it reports its full year FY20 results in August this year.

Robust working capital

A key metric of a company’s short-term liquidity, defined as the ability for a business to meet its day-to-day financial obligations, is working capital. Many investors commonly use the current ratio (current assets divided by current liabilities) to calculate working capital.

As seen from Ansell’s balance sheet as of 18 February, the company has a current ratio of 2.91. This means that Ansell has the necessary funds to meet all of its short-term payments almost 3 times over. It also highlights the strength of Ansell to withstand the challenging current economic environment.

Furthermore, in its COVID-19 business update, Ansell re-affirmed its FY20 earnings guidance of US$112c to 122c earnings per share. It also confirmed it had $500 million in cash reserves with no significant debt obligations for the next 12 months. This robust financial position may also afford the company some flexibility to boost its inventory, sales or staff volumes to reflect the upsurge in demand for its healthcare products.

Notably, Ansell’s high working capital suggests the company is efficiency managed and well-positioned for increased growth for the remainder of FY20 and beyond. This is a positive sign for prospective investors that the company share price may not have yet peaked.

Social implications of COVID-19

Many believe the current relentless demand for PPE and health products will persist beyond a widely available COVID-19 vaccine. It is hypothesised that industries will be forced to implement rigorous new OH&S standards, the use of gloves and masks will become commonplace for consumer-facing businesses. More broadly, caution toward superior hygiene will be embedded in societies.

Even if there is only a fraction of truth to this outlook, the increased daily demand for Ansell’s healthcare products creates a significant opportunity for prospective investors. As a manufacturer, Ansell relies on economies of scale to increase its profits. With the enlarged volumes of gloves and other PPE expected to be produced and distributed over the next 3–5 years, Ansell shareholders are likely to primarily benefit from wider profit margins and improved earnings growth.

Foolish takeaway  

Having risen steeply in the past month, the Ansell share price appears likely to remain near the $35.00 mark for the foreseeable future. Yet, due to Ansell’s strong financial position and the continuing demand for its niche range of health and PPE products, I believe there remains significant upside for investors still looking to add this company to their portfolio.

More reading

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Motley Fool contributor Toby Thomas has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. 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 Scott Phillips.

The post This ASX 200 stock has rocketed 63% in 2 months. Is the Ansell share price still a buy? appeared first on Motley Fool Australia.

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Receiving investment income from ASX dividend shares is a wondrous thing. But it’s even better when those dividends come with full franking credits. With the benefits of franking, the real yield you receive can be a lot more beneficial to your finances that just the cash payment alone.

So with that in mind, here are 3 ASX dividend shares that come with full franking credits. And don’t worry, these 3 shares will actually pay dividends in 2020, in my opinion.

Woolworths Group Ltd (ASX: WOW)

Woolworths is a company that was the face of the coronavirus pandemic for a few weeks in March and April. It’s fair to say the record levels of panic buying we saw during this time were pretty healthy for Woolworths’ bottom line. As such, I think this is a company that will be easily able to afford its dividend payments in 2020. And historically, these come with full franking credits.

On current prices, Woolworths shares are offering a trailing yield of 2.98% – which grosses-up to 4.26% including franking.

Telstra Corporation Ltd (ASX: TLS)

Telstra is another dividend share to consider in 2020. This telco giant should also be able to weather the COVID-19 storm reasonably well. With large numbers of Australians working remotely, our home internet use is likely to have exploded over the past few months.

Although the economic shutdowns have impeded the T22 cost-cutting plan Telstra has been working on, I still think this company will be a healthy dividend-payer this year and beyond. On current prices, Telstra shares are offering up a dividend yield of 5.01% – based on the company’s previous 12 months of payouts at 16 cents per share. When you include the benefits of full franking, this yield grosses-up to 7.16%.

Medibank Private Ltd (ASX: MPL)

Medibank is our final dividend pick today. This company is Australia’s largest private health insurer, despite it only being listed on the ASX since 2014. Since then, Medibank has amassed a pretty solid track record of dividend payments, delivering shareholders a dividend pay rise every year.

Medibank has already paid its interim dividend for 2020, which was paid in March, but I don’t see any reason why Medibank won’t be able to keep the streak alive later this year. The private health business has felt some impacts from the coronavirus, but they shouldn’t be enough to seriously dent this company’s finances in my view. On current pricing, Medibank shares are offering a 4.63% yield – which grosses-up to 6.6% with the company’s full franking credits.

More reading

• ASX retail stocks facing new billion-dollar earnings scare during COVID-19 recovery
• Insiders have been buying Medibank and this ASX share
• 3 ASX retail shares to own for the next 20 years
• Aussie retail numbers paint a gloomy ASX picture
• The Bubs share price is up 20% in May, will it catch up to the A2 Milk share price?

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Woolworths Limited. 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 Scott Phillips.

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If you’re looking for growth shares then I think the mid cap side of the market is a great place to start.

At this side of the market there are a good number of companies with the potential to grow materially in the future.

Three to consider buying are listed below:

Bravura Solutions Ltd (ASX: BVS)

Bravura Solutions is a ~$1.1 billion fintech company which provides software and services to the wealth management and funds administration industries. The key product in Bravura’s portfolio for me is the Sonata wealth management platform. This software is used to connect and engage with clients anytime, anywhere, via computers, tablets or smartphones. I expect demand for the platform to continue to grow and drive strong earnings growth in the coming years.

Bubs Australia Ltd (ASX: BUB)

Bubs is a $605 million infant formula and baby food company. It has come a long way in recent years and now sees its products stocked in hundreds of Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) supermarkets across the country. Thanks to this and growing demand from China, I’m optimistic the company has now reached a scale which will make its operations more and more profitable in the coming years. As a result, I think it could be a great long term option for investors.

Kogan.com Ltd (ASX: KGN)

Another option to consider is $840 million ecommerce company, Kogan. I believe Kogan has the potential to grow very strongly in the coming years thanks to the popularity of its offering and the ongoing shift to online for shopping. At present only ~10% of consumer spending is online, but this is likely to grow materially over the next couple of decades. I expect Kogan to be one of the biggest winners from the shift.

More reading

• 1 ASX growth company I’d buy with $2,000
• 3 ASX retail shares to own for the next 20 years
• $2,500 invested in these 3 ASX shares could make you a fortune in 10 years
• The Bubs share price is up 20% in May, will it catch up to the A2 Milk share price?
• 2 millionaire-maker ASX internet growth shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Bravura Solutions Ltd and BUBS AUST FPO. 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 Scott Phillips.

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