Nanosonics (ASX:NAN) Shares Grapple With Margin Squeeze Despite Trophon Strength

Nanosonics walked into this result with a stock that had been grinding lower, down about 22% over the past week and 11% over three months, and trading on a rich P/E of 47.4x. Today the sentiment test was simple: would investors still pay up for a premium multiple while net profit margins have slipped to 8.7% from 10.4% and revenue growth stayed modest for a medical equipment specialist?

The headline is clear: the market is wrestling with a margin squeeze story inside what is still pitched as a long term growth profile.

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FY 2026 Earnings Summary

• Revenue (FY 2026 vs FY 2025 trailing 12 months): A$203.9m vs A$198.6m (up about 3%)
• Net Income (Excl. Extra Items, FY 2026 vs FY 2025 trailing 12 months): A$17.8m vs A$20.7m (declined about 14%)
• Basic EPS (FY 2026 vs FY 2025 trailing 12 months): A$0.059 vs A$0.068 (declined about 12%)
• Net Profit Margin (FY 2026 vs prior year): 8.7% vs 10.4% (margin compressed)

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Nanosonics bull case leans on trophon resilience

Bulls argue that Nanosonics is building a long runway from faster replacement cycles, a growing consumables annuity and new digital and CORIS platforms. The FY26 print gives that view some backing. Trophon units placed rose to 4,230 with the installed base around 39,230, and upgrades surged with about 2,000 devices refreshed and around 8,000 legacy units still to go in North America. Annuity revenue reached A$141.8m and service revenue rose 19% in constant currency, which supports the recurring revenue narrative. EBIT from trophon only of A$50.6m with gross margin near 77% shows the core franchise is still throwing off cash to fund CORIS and digital work. Management is also keeping OpEx growth contained at 2% reported while still lifting CORIS spend, which aligns with bulls looking for disciplined reinvestment rather than an open-ended cost ramp.

Bear case focuses on margin squeeze and execution risk

Bears worry that Nanosonics is too reliant on trophon, faces margin compression and may overinvest ahead of proof points from CORIS. The latest year gives that concern some traction. Net profit margin slipped to 8.7% from 10.4% and reported revenue only moved to A$203.9m, so earnings are not keeping pace with top line. Gross margin eased due to product mix and FX while guidance flags a further step down to a range of 74% to 76% as tariffs, freight and higher volumes bite. CORIS OpEx is already about A$34.6m and rising, yet FY27 CORIS revenue is expected to be only low single digit millions, so the profit drag is real while diversification is still unproven. Regional softness in APAC and mixed EMEA also shows that trophon growth is not uniform, which keeps the concentration risk argument alive despite a strong North American showing.

Compare Nanosonics' premium P/E, margin pressure and trophon funded reinvestment story with where institutional expectations are actually set. See the consensus price target analysis for Nanosonics to check how current analyst targets line up with the latest A$2.83 share price.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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