The medical industry is well-positioned for solid growth due to increasing medical needs, the adoption of the latest technologies, and the inelastic demand for healthcare products and services, which enables medical companies to perform well regardless of economic conditions and maintain their profit margins.
Amid this backdrop, it could be wise to buy fundamentally strong medical stocks: Elevance Health, Inc. (ELV), MiMedx Group, Inc. (MDXG), and Nature's Sunshine Products, Inc. (NATR).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the medical industry’s prospects.
The medical industry is pivotal in enhancing people's quality of life. U.S. healthcare spending rose 4.1% in 2022, reaching $4.5 trillion or $13,493 per person. It accounted for 17.3% of the nation’s GDP. The U.S. national healthcare expenditure is estimated to reach $6.2 trillion by 2028.
The Centers for Medicare and Medicaid Services project a 5.1% annual growth in U.S. healthcare spending, reaching an estimated 19.6% of GDP by 2030. Health expenditures remain a priority regardless of economic cycles, allowing health insurance companies to improve their profit margins.
Health expenses have been growing yearly, and health spending is expected to rise significantly over the long term, hence, health insurance will become crucial. Health expenditures remain a priority regardless of economic cycles, allowing health insurance companies to improve their profit margins. The global health insurance market is expected to grow at a CAGR of 9.4%, reaching $4.66 trillion by 2032.
A rapidly aging population, the rise of infectious diseases, and the increase in chronic diseases are putting the focus on personalized medicine and technological advancements, positioning the medical industry for robust growth. The medical industry is embracing technology, including AI and gene editing, to improve disease detection and treatment, leading to more positive outcomes.
As a result, the digital health market is projected to reach $170.20 billion in 2023 and is expected to grow at a CAGR of 10.1%, reaching $275 billion by 2028. Furthermore, according to a report by Precedence Research, the global medical devices market is projected to grow at a CAGR of 5.8%, reaching $996.93 billion by 2032, driven by increasing healthcare expenditures.
Additionally, natural therapies are on the rise for various treatments. Natural therapies are often considered a way of promoting healthier living. The global herbal medicine market is projected to grow at a CAGR of 8% to reach $371.45 billion by 2030.
Considering these conducive trends, let’s analyze the fundamentals of the three medical stock picks mentioned above.
Elevance Health, Inc. (ELV)
ELV operates as a health benefits company. The company operates through four segments: Commercial & Specialty Business, Government Business, CarelonRx, and Other. It supports consumers, families, and communities across the entire care journey, connecting to the care, support, and resources to lead healthier lives.
In terms of the trailing-12-month EBITDA margin, ELV’s 6.03% is 11.7% higher than the 5.40% industry average. Likewise, its 1.58x trailing-12-month asset turnover ratio is 297.6% higher than the 0.40x industry average. Its 5.32% trailing-12-month EBIT margin is 555.6% higher than the 0.81% industry average.
For the fiscal third quarter that ended September 30, 2023, ELV’s total revenue increased 7.3% year-over-year to $42.85 billion. In addition, the company’s adjusted net income came in at $2.13 billion and $8.99, up 17.6% and 20.5% year-over-year, respectively.
Street expects ELV’s EPS and revenue for the quarter ending December 31, 2023, to increase 7.2% and 6.3% year-over-year to $5.60 and $42.15 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 6% to close the last trading session at $468.46.
ELV’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #4 out of 11 stocks in the A-rated Medical - Health Insurance industry. It has a B grade for Value, Stability, Sentiment, and Quality. Click here to see ELV’s ratings for Growth and Momentum.
MiMedx Group, Inc. (MDXG)
MDXG develops and distributes placental tissue allografts for various sectors of healthcare. It processes the human placental tissues utilizing its patented and proprietary PURION process to produce allografts that retain the tissue's inherent biological properties and regulatory proteins.
On September 26, 2023, MDXG introduced EPIEFFECT, a new solution in its Advanced Wound Care lineup. This addition enhances the company's core offerings for healthcare professionals addressing challenging wounds like diabetic foot ulcers and venous leg ulcers, along with other common conditions.
In terms of the trailing-12-month EBIT margin, MDXG’s 5.45% is 572.2% higher than the 0.81% industry average. Likewise, its 1.71x trailing-12-month asset turnover ratio is 329.9% higher than the 0.40x industry average. Moreover, its 82.15% trailing-12-month gross profit margin is 44.5% higher than the 56.84% industry average.
MDGX’s net sales for the third quarter that ended September 30, 2023, increased 20.7% year-over-year to $81.71 million. Its gross profit rose 20.6% over the prior-year quarter to $66.92 million. Likewise, its adjusted EBITDA came in at $17.62 million, up 640% year-over-year.
The company’s adjusted net income was $8.03 million, compared to an adjusted net loss of $1.70 million in the year-ago quarter. In addition, its adjusted earnings per share came in at $0.05, compared to an adjusted loss per share of $0.03 in the year-ago quarter.
Analysts expect MDXG’s revenue for the quarter ending December 31, 2023, to increase 14.5% year-over-year to $85.15 million. Likewise, its EPS for the fiscal 2024 is expected to increase 207.3% year-over-year to $0.32. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 222.3% year-to-date to close the last trading session at $8.96.
MDXG’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Quality and a B for Sentiment. It is ranked #2 out of 145 stocks in the Medical - Devices & Equipment industry. Click here to see MDXG’s Value, Momentum, and Stability ratings.
Nature's Sunshine Products, Inc. (NATR)
NATR is a natural health and wellness company that manufactures and sells nutritional and personal care products internationally. It offers general health products related to blood sugar support, bone health, cellular health, cognitive function, joint health, mood, sexual health, sleep, sports and energy, and vision.
In terms of the trailing-12-month gross profit margin, NATR’s 72.18% is 113% higher than the 33.89% industry average. Likewise, its 1.90x trailing-12-month asset turnover ratio is 126.9% higher than the 0.84x industry average. Additionally, its 6.45% trailing-12-month levered FCF margin of 32.7% higher than the industry average of 4.86%.
For the fiscal third quarter that ended September 30, 2023, NATR’s net sales increased 6.4% year-over-year to $111.20 million. Its gross profit rose 8.5% over the prior-year quarter to $81.24 million. Moreover, its adjusted EBITDA increased 50% year-over-year to $10.25 million.
Furthermore, the company’s non-GAAP net income attributable to common shareholders and adjusted net income per share came at $2.83 million and $0.15, compared to a non-GAAP net loss and adjusted loss per share of $1.05 million and $0.06 in the year-ago quarter.
For the quarter ending December 31, 2023, NATR’s EPS and revenue are expected to increase 50% and 8.1% year-over-year to $0.15 and $111.10 million, respectively. Over the past year, the stock has gained 100.6% to close the last trading session at $16.51.
NATR’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, Sentiment, and Quality and a B for Growth and Stability. Within the A-rated Medical - Consumer Goods industry, it is ranked first out of nine stocks. To see NATR’s Momentum rating, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
ELV shares were trading at $469.59 per share on Monday afternoon, up $1.13 (+0.24%). Year-to-date, ELV has declined -7.28%, versus a 24.90% 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 Solid Medical Stocks to Watch for Year-End Success and Beyond StockNews.com
