The healthcare industry is expected to remain on a positive growth trajectory, given the inelastic demand the industry enjoys for its products and services. Moreover, technological advancements and rising health awareness among individuals could benefit the industry.
Given such tailwinds, let us explore some fundamentally strong healthcare stocks Agilent Technologies, Inc. (A), Bruker Corporation (BRKR), and Semler Scientific, Inc. (SMLR) now.
A toxic blend of the recent financial sector tumult and the Fed’s ongoing rate hikes to curb the stubbornly high inflation is anticipated to plague the overall economy to some extent in the upcoming months, leading to heightened fears of an impending recession.
However, the healthcare sector will likely remain firm thanks to rapid technological advancements and soaring demand for healthcare products. The global healthcare services market is expected to reach $21.06 trillion by 2030, growing at a CAGR of 8.3%.
Medical technology played a very crucial role during the pandemic, and its evolution is helping shape the entire healthcare landscape. As the demand for efficient and advanced medical devices is growing, the medical devices market is expected to reach $964.90 billion by 2030 at a CAGR of 7%.
A proactive approach to health management enables an individual to manage, postpone and even prevent some medical conditions. Diagnostic testing is crucial for almost all life science operations, as its implications range from medical device manufacturing to patient care and reporting to laboratory operations.
The U.S. medical diagnostics market is anticipated to grow at a CAGR of 4.6% to reach $41.95 billion in 2027. Technological innovations and operational excellence are prerequisites for the growth of the industry.
Against this backdrop, adding quality healthcare stocks A, BRKR, and SMLR to your portfolios could be wise.
Agilent Technologies, Inc. (A)
A is a provider of application-focused solutions for the entire laboratory workflow. The company operates in the life sciences, diagnostics, and applied chemical markets.
On April 3, 2023, A announced the latest addition to the Cary 3500 UV-Vis Series with the release of the Agilent Cary 3500 Flexible UV-Vis System.
This new solution is a double-beam spectrophotometer with advanced photometric performance for diverse sample-type measurements with minimal sample preparation. The series can be deployed in regulated environments, specifically the pharma/biopharma industry.
On February 22, A announced its quarterly dividend of $0.225 per share. The quarterly dividend will be paid to all shareholders on April 26, 2023. Its annual dividend of $0.90, translating to a yield of 0.65% at the current price. Its four-year average dividend yield is 0.68%. Its dividends have grown at 8.1% and 9.1% CAGRs over the past three and five years, respectively.
A’s trailing-12-month ROCE, ROTC, and ROTA of 24.58%, 12.78%, and 12.12% compares to the industry averages of negative 40.33%, 21.84%, and 31.69%, respectively. Also, its trailing-12-month EBITDA margin of 29.13% is 970.2% higher than the 2.72% industry average.
For the fiscal first quarter that ended January 31, 2023, A’s net revenue increased 4.9% year-over-year to $1.76 billion, while its income from operations increased 13.3% year-over-year to $426 million. During the same quarter, the company’s non-GAAP net income came in at $406 million, or $1.37 per share, up 10.3% and 13.2% year-over-year, respectively.
Analysts expect A’s revenue and EPS for the fiscal second quarter ending April 2023 to increase 4.1% and 11.7% year-over-year to $1.67 billion and $1.26, respectively. The company surpassed consensus EPS estimates in each of the four trailing quarters, which is impressive.
The stock has gained 2.3% over the past year and 8.3% over the past six months to close the last trading session at $138.03.
A’s fundamental strength is reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
A has a B grade for Stability, Sentiment, and Quality. It is ranked #2 of 55 stocks in the Medical – Diagnostics/Research industry.
Click here to get additional ratings for A’s Growth, Value, and Momentum.
Bruker Corporation (BRKR)
BRKR develops, manufactures, and distributes scientific instruments, and analytical and diagnostic solutions in the United States and internationally. The company operates through four segments: Bruker Scientific Instruments (BSI) BioSpin; BSI CALID; BSI NANO; and Bruker Energy & Supercon Technologies.
On March 17, BRKR announced that the United Kingdom is expanding its fundamental research infrastructure with recent orders for two 1.2 GHz Avance™ nuclear magnetic resonance (NMR) spectrometers for the University of Warwick and the University of Birmingham.
Each institution already has a Bruker 1.0 GHz NMR spectrometer and will advance their capabilities further for research.
On February 17, BRKR announced its quarterly dividend of $0.05 per share, which was paid to all shareholders on March 17, 2023. Its annual dividend of $0.20, translating to a yield of 0.25% at the current price. Its four-year average dividend yield is 0.30%. Its dividends have grown at 7.7% and 4.6% CAGRs over the past three and five years, respectively.
BRKR’s trailing-12-month ROCE, ROTC, and ROTA of 27.16%, 11.61%, and 8.21% compares to the industry averages of negative 40.33%, 21.84%, and 31.69%, respectively. Also, its trailing-12-month EBITDA margin of 21.55% is 691.5% higher than the 2.72% industry average.
For its fiscal fourth quarter that ended December 31, 2022, BRKR’s revenue increased 3.6% year-over-year to $708.40 million. The company’s non-GAAP gross profit came in at $372.30 million, up 6.3% from the prior-year quarter. Its non-GAAP operating income has been reported at $148.90 million, representing a 3.5% year-over-year improvement.
Non-GAAP net income attributable to BRKR came in at $109.40 million, up 21.3% from the prior-year period. Its non-GAAP earnings per share increased 25.4% year-over-year to $0.74.
Analysts expect BRKR’s revenue to increase 12.5% year-over-year to $662.05 million in its fiscal second quarter ending June 2023. Its EPS is expected to grow 27.8% year-over-year to $0.58 for the same quarter. In addition, the company surpassed consensus revenue estimates in three of the trailing four quarters.
The stock has gained 21.2% over the past year and 41.3% over the past six months to close its last trading session at $78.75.
BRKR’s POWR Ratings reflect its positive outlook. It is rated B overall, translating to a Buy in the proprietary rating system.
BRKR is rated a B grade Value and Quality. Within the same industry, it is ranked #3.
Beyond what we have stated above, click here to see additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for BRKR.
Semler Scientific, Inc. (SMLR)
SMLR develops, manufactures, and markets products and services for treating chronic diseases. In addition, it provides technology solutions for clinical effectiveness.
In terms of forward EV/Sales, SMLR is trading at 1.82x, 50.4% lower than the industry average of 3.68x. Its forward EV/EBITDA multiple of 5.75 is 56.4% lower than the industry average of 13.2.
SMLR’s trailing-12-month gross profit margin of 92.50% is 65.6% higher than the industry average of 55.85%. Also, its trailing-12-month EBITDA margin of 30.7% is significantly higher than the 2.72% industry average.
SMLR’s revenues increased 19.5% year-over-year to $13.79 million for the fiscal fourth quarter that ended December 31, 2022. Its income from operations increased 111.5% year-over-year to $3.62 million for the same quarter.
For the fiscal fourth quarter that ended December 31, 2022, the company’s net income rose 113.4% from its year-ago value to $3.22 million. Its net income per share grew 127.8% from the prior-year quarter to $0.41 for the same quarter.
Street expects SMLR’s revenue to increase 7.9% year-over-year to $16 million in its fiscal second quarter ending June 2023. Its EPS is expected to grow 5.9% year-over-year to $0.54 for the same quarter. In addition, the company surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 4.9% over the past month to close its last trading session at $23.07.
It is no surprise that SMLR is rated A overall, translating to a Strong Buy in the POWR Ratings system.
SMLR is also rated an A grade for Quality and B for Growth, Value, and, Sentiment. Within the same industry, it is ranked first.
To see additional POWR Ratings for Stability and Momentum for SMLR, click here.
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A shares were unchanged in premarket trading Monday. Year-to-date, A has declined -7.61%, versus a 7.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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