Despite economic uncertainties, the healthcare sector remains strong, given the inelastic demand for its products and services. The increasing demand for quality healthcare services and rapid adoption of advanced technologies position the industry for steady growth.
Given this backdrop, it could be wise to buy fundamentally strong healthcare stocks: HCA Healthcare, Inc. (HCA), LifeVantage Corporation (LFVN), and Semler Scientific, Inc. (SMLR).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the healthcare industry is well-positioned for growth.
The rising need to treat chronic diseases and a global aging population drive the prospects of the healthcare industry. Moreover, advanced technologies transform hospital operations, improve team collaboration, streamline workflows, and empower medical staff with timely patient details for more informed healthcare delivery.
The U.S. hospital market is projected to grow at a 2.7% CAGR, reaching a market volume of $1.60 trillion by 2027.
The Centers for Medicare and Medicaid Services forecast a 5.1% annual growth in U.S. healthcare spending, reaching a projected 19.6% of GDP by 2030. Health expenditures stay a priority through economic cycles.
Let’s delve into the fundamentals of the featured stocks.
HCA Healthcare, Inc. (HCA)
HCA and its subsidiaries provide healthcare services in the United States. It operates general and acute care hospitals that offer medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic, and emergency services; and outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy.
On October 17, 2023, HCA, Sarah Cannon Cancer Institute, and GRAIL partnered to improve cancer care through early detection. HCA will offer GRAIL's Galleri Multi-Cancer Early Detection test, tackling late-stage cancer issues. Galleri is validated for over 50 cancer types. Sarah Cannon Cancer Institute will support patients with positive results, highlighting this innovative screening paradigm.
Chris Ott, MD, FACEP, Chief Medical Officer at HCA, said, “As a leader in cancer prevention and care, this is an opportunity to be at the forefront of a new age of cancer screening. This partnership allows us to support our patients and clinicians by offering cutting-edge innovation, including GRAIL’s groundbreaking MCED test, as part of our comprehensive cancer care programs.”
On October 12, 2023, HCA's Johnston-Willis Hospital in Richmond, Virginia, started a clinical trial combining non-invasive focused ultrasound and systemic immunotherapy for treating lung cancer brain metastases. The goal is to open the blood-brain barrier for precise medication delivery to critical lesions.
In terms of forward EV/Sales, HCA’s 1.72x is 47.8% lower than the 3.30x industry average. Its 8.86x forward EV/EBITDA is 31.3% lower than the 12.91x industry average. Likewise, its 11.76x forward EV/EBIT is 30.1% lower than the 16.82x industry average.
In terms of the trailing-12-month EBITDA margin, HCA’s 19.44% is 267.3% higher than the 5.29% industry average. Likewise, its 3.78% trailing-12-month levered FCF margin is significantly higher than the 0.11% industry average. Furthermore, its 1.19x trailing-12-month asset turnover ratio is 204% higher than the 0.39x industry average.
For the fiscal third quarter that ended September 30, 2023, HCA’s revenues increased 8.3% year-over-year to $16.21 billion. Its net income attributable to HCA was $1.08 billion, while its EPS was $3.91. Additionally, its adjusted EBITDA stood at $2.88 billion.
Street expects HCA’s EPS and revenue for the quarter ending December 31, 2023, to increase 8.7% and 6.5% year-over-year to $5.05 and $16.51 billion, respectively. Over the past month, the stock has gained 11.6% to close the last trading session at $251.37.
HCA’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #2 out of 11 stocks in the Medical - Hospitals industry. It has a B grade for Value, Stability, and Sentiment. Click here to see HCA’s Growth, Momentum, and Quality ratings.
LifeVantage Corporation (LFVN)
LFVN engages in identifying, researching, developing, formulating, and selling advanced nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, skin and hair care, bath and body, and targeted relief products.
On November 2, 2023, LFVN launched TrueScience TrueRenew, a retinol alternative addressing 11 signs of aging without harsh side effects. The product complements the brand’s TrueScience Activated Skincare line and is part of the Healthy Glow Essentials product stack, targeting the growing global retinol market, which is expected to reach $1.79 billion by 2030.
In terms of the trailing-12-month gross profit margin, LFVN’s 79.52% is 135.8% higher than the 33.72% industry average. Likewise, its 3.17x trailing-12-month asset turnover ratio is 277.2% higher than the 0.84x industry average. Furthermore, its 5.81% trailing-12-month levered FCF margin is 19.5% higher than the 4.86% industry average.
For the fiscal first quarter ending September 30, 2023, LFVN’s net revenue increased came in at $51.36 million. Its non-GAAP net income and non-GAAP EPS increased 139.7% and 116.7% over the prior-year quarter to $1.67 million and $0.13, respectively. In addition, its adjusted EBITDA came in at $3.99 million, up 41.4% year-over-year.
LFVN has gained 67.9% year-to-date to close the last trading session at $5.91.
LFVN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B for Sentiment. Within the Medical – Consumer Goods industry, it is ranked #2 out of 10 stocks. To see LFVN’s Growth, Momentum, and Sentiment ratings, click here.
Semler Scientific, Inc. (SMLR)
SMLR provides technology solutions to improve healthcare providers' clinical effectiveness and efficiency. The company's products include QuantaFlo, a four-minute in-office blood flow test, and Insulin Insights, a software program that a healthcare provider uses to optimize outpatient insulin dosing.
In terms of forward non-GAAP P/E, BLBD’s 14.66x is 21.1% lower than the 18.58x industry average. Its 3.04x forward EV/Sales is 7.9% lower than the 3.30x industry average. Likewise, its 8.29x forward EV/EBIT is 50.7% lower than the 16.82x industry average.
In terms of the trailing-12-month EBITDA margin, SMLR’s 36.19% is 583.8 higher than the 5.29% industry average. Likewise, its 0.95x asset turnover ratio is 143.4% higher than the 0.39x industry average. Furthermore, its 18.77% levered FCF margin is significantly higher than the 0.11% industry average.
SMLR’s revenues for the third quarter ended September 30, 2023, increased 16.2% year-over-year to $16.32 million. Its income from operations rose 41% year-over-year to $6.30 million. The company’s net income increased 50% year-over-year to $5.51 million. Moreover, the company’s net income per share came in at $0.71, up 54.3% over the prior-year quarter.
Analysts expect SMLR’s EPS and revenue for the quarter ending December 31, 2023, to increase 39% and 5.1% year-over-year to $0.57 and $14.50 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 66.4% to close the last trading session at $38.36.
SMLR’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Sentiment and Quality and a B for Growth. It is ranked first out of 46 stocks in the Medical – Diagnostics/Research industry. Click here to see SMLR’s Value, Momentum, and Stability ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
HCA shares were unchanged in premarket trading Tuesday. Year-to-date, HCA has gained 5.47%, versus a 20.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Healthcare Stocks to Buy With Major Value Behind Them StockNews.com
