The increasing preference for care settings such as home care, nursing homes, hospice, and assisted living facilities in the US is fueling the growth of the medical industry. So, investors could consider investing in popular medical stocks Fresenius Medical Care AG & Co. KGaA (FMS), Viemed Healthcare, Inc. (VMD), and Addus HomeCare Corporation (ADUS).
The surging prevalence of chronic illnesses, government initiatives, increased demand for nursing homes among younger individuals, and the growing elderly population are bolstering the medical services industry in the US.
Additionally, the adoption of technology-based care services like app-based teleconsultations, remote patient monitoring, and AI-based therapeutic and monitoring devices is contributing to the increased demand for these services.
The U.S. care services market is projected to grow at a CAGR of 5.8% until 2030.
In addition, the global remote monitoring systems industry is on the rise, driven by its effectiveness in managing chronic diseases, reducing healthcare costs, and preventing hospitalizations. The COVID-19 pandemic has accelerated its adoption as telemedicine apps automate tasks, reducing administrative burdens and the need for physical hospital visits.
As a result, the global remote patient monitoring system market was valued at $4.40 billion in 2022 and is expected to expand at a CAGR of 18.5% by 2030.
Furthermore, the medical technology sector is thriving due to technological advancements and heightened demand for medical devices and diagnostics. The industry is expected to generate substantial revenue, with projections indicating it will reach approximately $570.70 billion in the current year. This growth highlights the industry's pivotal role in healthcare, as it drives innovation and addresses healthcare challenges effectively.
With these favorable trends in mind, let's delve into the fundamentals of the three Medical-Services stock picks, beginning with the third choice.
Stock #3: Fresenius Medical Care AG & Co. KGaA (FMS)
Headquartered in Bad Homburg, Germany, FMS provides dialysis care and related services in Germany, North America, and internationally. It also develops, manufactures, and distributes dialysis products, non-dialysis products, and in-licenses renal pharmaceuticals.
On August 23, 2023, FMS announced that the U.S. Food and Drug Administration (FDA) had provided clearance for Versi®HD with GuideMe Software, a completely reinvented self-guided interface for the company's VersiHD chronic home hemodialysis (HHD) system. VersiHD with GuideMe Software aims to transform the experience of HHD for patients and nurses.
FMS pays $0.60 as dividends annually, which translates to a yield of 2.70% on the current market price. Its four-year average dividend is 2.50%.
In the fiscal second quarter that ended June 30, 2023, FMS’ total revenue grew 1.4% year-over-year to €4.83 billion ($5.16 billion). Its operating income increased 4.7% year-over-year to €357 million ($381.08 million). Its net income, excluding special items, improved 5.1% from the year-ago quarter to €175 million ($186.80 million).
Analysts expect FMS’ EPS and revenue to rise 61% and 4.5% year-over-year to $0.34 and $5.26 billion in the fiscal third quarter ending September 2023. The company has surpassed the EPS estimates in three of the trailing four quarters, which is remarkable.
The stock has soared 43.9% over the past nine months and 1.5% intraday to close the last trading session at $22.74.
FMS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating 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.
FMS also has an A grade for Stability and a B for Value and Quality. It is ranked #6 in the 70-stock Medical-Services industry.
Access FMS’ additional ratings for Growth, Sentiment, and Momentum here.
Stock #2: Viemed Healthcare, Inc. (VMD)
VMD provides in-home durable medical equipment (DME) and post-acute respiratory healthcare services to patients. It also offers respiratory disease management solutions to chronic obstructive pulmonary disease (COPD) patients, neuromuscular care, oxygen therapy services, sleep apnea management solutions, and related equipment.
On June 1, VMD announced that it had successfully completed its previously announced acquisition of Tennessee-based Home Medical Products, Inc., a large regional provider of respiratory-focused home medical solutions.
Pursuant to the terms of the definitive agreement, VMD acquired 100% of the equity ownership of HMP in exchange for approximately $28 million in cash at closing, subject to post-closing net working capital and tax-related adjustments.
For the fiscal second quarter ended June 30, 2023, VMD’s revenue increased 30 year-over-year to $43.31 million. Its gross profit grew 28% year-over-year to $26.11 million. Also, its net income rose 141% and 200% from the previous-year quarter to $2.33 million and $0.06 per share.
For the fiscal third quarter ending September 2023, VMD’s EPS is expected to increase 183.3% year-over-year to $0.09. Its revenue for the current quarter is expected to increase 38.4% year-over-year to $49.50 million. Also, the company has exceeded the EPS estimates in three of the trailing four quarters.
The stock gained 1.4% intraday to close the last trading session at $7.39.
VMD’s POWR Ratings reflect solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Growth, Stability, Sentiment, and Quality. The stock is ranked #5 in the same industry.
In addition to the POWR Ratings grades just highlighted, one can see VMD’s Growth, Value, Momentum, and Stability ratings here.
Stock #1: Addus HomeCare Corporation (ADUS)
ADUS offers personal care, hospice, and home health services in the United States, serving the elderly, chronically ill, disabled individuals, and those at risk of hospitalization. The company caters to various clients, including government agencies, managed care organizations, insurers, and private individuals.
On August 1, ADUS successfully acquired Tennessee Quality Care, a home health, hospice, and private-duty nursing service provider based in Franklin, Tennessee, bolstering ADUS’ presence in Tennessee's home care sector and advancing its growth strategy through strategic acquisitions.
During the fiscal second quarter that ended June 30, 2023, ADUS’ net service revenues increased 9.7% year-over-year to $259.98 million. Its gross profit increased 8.9% from the prior-year quarter to $82.32 million.
In addition, the company’s adjusted net income and adjusted net income per share grew 18.3% and 17.6% from the prior-year quarter to $17.41 million and $1.07.
ADUS’ revenue is likely to increase 11.3% year-over-year to $267.71 million in the current quarter ending September 2023. Its EPS is expected to increase 15.1% year-over-year to $1.08 in the same quarter. Additionally, it topped the EPS estimates in each of the trailing four quarters.
The stock gained marginally intraday to close the last trading session at $83.64.
ADUS’ POWR Ratings reflect a robust outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
ADUS has a B grade for Growth, Sentiment, and Quality. It is ranked #4 in the same industry.
Click here to see the other ratings of ADUS for Value, Momentum, and Stability.
What To Do Next?
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FMS shares were trading at $22.66 per share on Tuesday morning, down $0.08 (-0.35%). Year-to-date, FMS has gained 41.14%, versus a 16.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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