With concerns of an impending recession and current macroeconomic volatility, medical stocks resilient to economic downturns offer strategic investment options. Therefore, investors could consider buying fundamentally strong stocks Fresenius SE & Co. KGaA (FSNUY), Tenet Healthcare Corporation (THC), Select Medical Holdings Corporation (SEM). These stocks seem to be trading at discounts.
According to the U.S. Bureau of Labor Statistics, inflation declined in May. The consumer price index increased 4% relative to a year earlier, its lowest rate since March 2021. However, the probability of a U.S. recession remains elevated.
Due to the inelastic demand for medical products and services, the healthcare industry can maintain its profit margins regardless of economic conditions. Moreover, amid an aging population, the demand for medical services is only expected to go up.
According to Statista, revenue in the Health Care segment is expected to reach $27.67 billion by 2027, growing at a CAGR of 12.9%.
Given these factors, investors could look to buy the featured stocks. Let’s take a closer look at their fundamentals.
Fresenius SE & Co. KGaA (FSNUY)
Headquartered in Bad Homburg vor der Höhe, Germany, FSNUY, a healthcare company, provides products and services for dialysis, hospitals, and outpatient medical care. It operates through four segments: Fresenius Medical Care; Fresenius Kabi; Fresenius Helios; and Fresenius Vamed.
In terms of forward non-GAAP P/E, FSNUY’s 13.78x is 29.6% lower than the 19.57x industry average. Likewise, its 10.72x forward EV/EBIT is 36% lower than the 16.74x industry average.
FSNUY’s revenue for the fiscal first quarter increased 5.2% year-over-year to €10.23 billion ($11.13 billion). The company’s gross profit increased 1.5% year-over-year to €2.51 billion ($2.73 billion). Moreover, its EPS came in at €0.61.
Analysts expect FSNUY’s revenue for the quarter ending June 30, 2023, to increase 8.2% year-over-year to $11.03 billion. Over the past three months, the stock has gained 12.8% to close the last trading session at $6.98.
FSNUY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Medical - Hospitals industry, it is ranked #3 out of 11 stocks. The stock has an A grade for Value and Stability.
Click here to see the additional ratings of FSNUY for Growth, Momentum, Sentiment, and Quality.
Tenet Healthcare Corporation (THC)
THC operates as a diversified healthcare services company. The company operates through three segments: Hospital Operations; Ambulatory Care; and Conifer.
In terms of forward non-GAAP P/E, THC’s 13.60x is 32.4% lower than the 20.12x industry average. Its 1.28x forward EV/Sales is 67% lower than the 3.89x industry average. Likewise, its 7.76x forward EV/EBITDA is 41.7% lower than the 13.32x industry average.
THC’s net operating revenues for the first quarter that ended March 31, 2023, increased 5.8% year-year-over-year to $5.02 billion. Its net income increased 5.7% year-over-year to $296 million. Additionally, its EPS came in at $1.32, representing a 3.1% increase over the prior-year quarter.
THC’s revenue for the quarter ending June 30, 2023, is expected to increase 5.9% year-over-year to $4.91 billion. Over the past six months, the stock has gained 75.7% to close the last trading session at $78.19.
THC’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #2 in the same industry. It has a B grade for Growth, Value, and Sentiment.
In total, we rate THC on eight different levels. Beyond what we stated above, we have also given THC grades for Momentum, Stability, and Quality. Click here to access all the ratings.
Select Medical Holdings Corporation (SEM)
SEM operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. It operates through four segments: The Critical Illness Recovery Hospital; The Rehabilitation Hospital; The Outpatient Rehabilitation; and The Concentra
In terms of forward non-GAAP P/E, SEM’s 15.39x is 22.1% lower than the 19.74x industry average. Its 1.36x EV/Sales is 64.4% lower than the 3.82x industry average. Likewise, its 11.22x forward EV/EBITDA is 13.9% lower than the 13.03x industry average.
SEM’s revenue for the first quarter that ended March 31, 2023, increased 4.1% year-over-year to $1.66 billion. The company’s income from operations increased 45.7% year-over-year to $151.46 million. Its net income attributable to SEM increased 44.2% year-over-year to $70.81 million. In addition, its EPS came in at $0.56, representing a 51.4% increase from the prior-year quarter.
SEM’s EPS and revenue for the quarter ending June 30, 2023, is expected to increase 8.2% and 3.6% year-over-year to $0.47 and $1.64 billion, respectively. Over the past year, the stock has gained 25.6% to close the last trading session at $28.97.
SEM’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #4 in the Medical - Hospitals industry. It has a B grade for Stability and Sentiment. We have also given SEM grades for Growth, Value, Momentum, and Quality. Get all SEM ratings here.
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FSNUY shares were trading at $6.95 per share on Friday morning, down $0.03 (-0.43%). Year-to-date, FSNUY has gained 1.70%, versus a 15.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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