The medical industry is poised for continuous growth thanks to technological advancements. From innovative devices such as wearables to health data services, the medical industry is working towards opening doors for more personalized and value-based healthcare.
So, quality medical stocks HCA Healthcare, Inc. (HCA), Fresenius SE & Co. KGaA (FSNUY), Tenet Healthcare Corporation (THC), Encompass Health Corporation (EHC), and Select Medical Holdings Corporation (SEM) might be solid additions to one’s portfolio for healthy returns.
The medical sector is experiencing a boost due to the growing adoption of data analytics and companies’ rising emphasis on preventive care. Additionally, the digital healthcare market's expansion is facilitated by the increasing penetration of smartphones, enhanced internet connectivity, and advancements in healthcare IT infrastructure.
The global digital healthcare market is anticipated to grow at a CAGR of 23.7% until 2030, reaching a whopping $1.30 trillion.
In addition, the increase in chronic diseases and an aging population are the main drivers of the medical market. Over the last 50 years, worldwide obesity has nearly tripled, according to the World Health Organization. More than 13% of adults are obese, and around 39% of adults are overweight.
Additionally, poor lifestyles, such as lack of exercise, unhealthy diet habits, and smoking, lead to further health problems. As a result, revenue in the hospital market is expected to show a CAGR of 2.7%, resulting in a market volume of $1.60 billion by 2027.
Let’s discuss the stocks mentioned above in detail:
HCA Healthcare, Inc. (HCA)
HCA is a healthcare services company that owns and operates general and acute care hospitals offering medical, surgical, emergency, and outpatient services. In addition, the company operates in two geographically organized groups: The National and American Groups.
On May 18, HCA entered into an agreement to purchase 41 urgent care centers in Texas from FastMed. On completion, this transaction would expand the company’s urgent care operations significantly within the state and provide a seamless connection to its broader healthcare network for high-quality healthcare services.
On May 8, the company announced more than $300 million in investments to support clinical education and the training of nurses.
This includes more than $200 million towards the expansion of Galen College of Nursing and approximately $136 million towards the opening of new HCA Healthcare Centers for Clinical Advancement. Such investments should aid the company in delivering high-quality patient care and medical services.
On July 27, 2023, HCA declared a quarterly cash dividend on its common stock of $0.60 per share, payable on September 29, 2023. HCA pays $2.40 annually as dividends which translates to a yield of 0.90% at the current price. Its four-year average dividend yield is 0.84%.
HCA’s trailing-12-month EBITDA margin of 19.88% is 280.2% higher than the 5.23% industry average. Its trailing-12-month EBIT margin of 15% is significantly higher than the 0.24% industry average.
For the fiscal second quarter that ended June 30, 2023, HCA’s revenues increased 5% year-over-year to $15.86 billion. Its adjusted EBITDA rose marginally from the year-ago quarter to $3.06 billion, while its EPS improved 10% year-over-year to $4.29.
Analysts expect HCA’s revenue and EPS for the fiscal third quarter (ending September 2023) to increase 6.2% and 5.1% year-over-year to $15.91 billion and $4.13, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 23.2% over the past year to close the last trading session at $267.05.
HCA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B for Value, Sentiment, and Quality. Among the ten stocks in A-rated the Medical – Hospitals industry, it is ranked #2.
Click here to see the other ratings of HCA for Growth and Momentum.
Fresenius SE & Co. KGaA (FSNUY)
Headquartered in Bad Homburg vor der Höhe, Germany, FSNUY is a healthcare company that 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.
FSNUY pays $0.25 annually as dividends which translates to a yield of 3.07% at the current price. Its four-year average dividend yield is 2.51%.
FSNUY’s trailing-12-month EBITDA margin of 11.21% is 114.5% higher than the 5.23% industry average. Its trailing-12-month EBIT margin of 7.08% is significantly higher than the 0.24% industry average.
During the fiscal first quarter that ended December 31, 2023, FSNUY’s revenue increased 13.9% year-over-year to €10.23 billion ($11.53 billion). Its gross profit grew 1% year-over-year to €2.51 billion ($2.74 billion), while its net income came in at €463 million ($504.78 million). Its EPS came in at €0.61.
Street expects FSNUY’s revenue for the fiscal third quarter ending September 2023 to increase 10.4% year-over-year to $11.41 billion.
The stock has gained 31% over the past nine months, closing the last trading session at $8.07.
FSNUY has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
The stock has an A grade for Stability and a B for Value and Sentiment. It is ranked first in the same industry.
Access additional FSNUY grades for Growth, Momentum, and Quality here.
Tenet Healthcare Corporation (THC)
THC operates as a diversified healthcare services company. The company operates through three segments, Hospital Operations; Ambulatory Care; and Conifer.
THC’s trailing-12-month EBITDA margin of 18.36% is 251.3% higher than the 5.23% industry average. Its trailing-12-month EBIT margin of 14.13% is significantly higher than the 0.24% industry average.
For the fiscal second quarter ended June 30, 2023, THC’s net operating revenues increased 9.6% year-over-year to $5.08 million. Its adjusted EBITDA remained flat at $843 million, while its earnings per share available to THC common shareholders increased 228.6% year-over-year to $1.15.
THC’s revenue for the current quarter ending September 30, 2023, is expected to increase 4.4% year-over-year to $5.01 billion. Its EPS is expected to be $1.20 in the same quarter. It has surpassed EPS estimates in each of the trailing four quarters.
Shares of THC have gained 68.8% over the past nine months to close the last trading session at $71.91.
THC’s sound 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 stock has a B grade for Growth and Value. Within the same industry, it is ranked #5.
Beyond what is stated above, we’ve also rated THC for Quality, Stability, Sentiment, and Momentum. Get all THC ratings here.
Encompass Health Corporation (EHC)
EHC provides post-acute healthcare services in the United States. It provides specialized rehabilitative treatment on an inpatient basis to patients who have experienced physical or cognitive disabilities or injuries due to medical conditions, such as strokes, hip fractures, and various debilitating neurological conditions.
On May 19, 2023, EHC announced it plans to build a freestanding, 50-bed inpatient rehabilitation hospital in Concordville, Pennsylvania. The hospital will be located on Baltimore Pike within Concord Township.
On July 20, 2023, EHC declared a quarterly cash dividend on its common stock of $0.15 per share, payable on October 16, 2023. EHC pays $0.60 annually as dividends which translates to a yield of 0.85% at the current price. Its four-year average dividend yield is 1.55%.
EHC’s trailing-12-month EBITDA margin of 20.82% is 298.3% higher than the 5.23% industry average. Its trailing-12-month EBIT margin of 15.10% is significantly higher than the 0.24% industry average.
EHC’s net operating revenues increased 11.7% year-over-year to $1.19 million in the second quarter that ended June 30, 2023. Its adjusted EBITDA increased 27.1% year-over-year to $249.60 million, while its adjusted earnings per share increased 50.8% year-over-year to $0.95.
The consensus EPS estimate for the fiscal third quarter ending September 2023 of $0.76 reflects a 13.7% rise year-over-year. Its revenue estimate for the same quarter of $1.19 billion indicates an improvement of 9.5% from the prior-year quarter. Additionally, EHC has topped consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 32.5% over the past year to close the last trading session at $70.66.
EHC’s robust prospect is reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
EHC has an A grade for Sentiment and a B for Growth. It is ranked #4 in the same industry.
Click here for EHC’s additional POWR Ratings (Momentum, Value, Quality, and Stability).
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.
On August 3, 2023, SEM declared a quarterly cash dividend on its common stock of $0.13 per share, payable on September 1, 2023. SEM pays $0.50 annually as dividends which translates to a yield of 1.76% at the current price. Its four-year average dividend yield is 0.87%.
SEM’s trailing-12-month EBITDA margin of 10.50% is 100.8% higher than the 5.23% industry average. Its trailing-12-month EBIT margin of 7.32% is significantly higher than the 0.24% industry average.
During the fiscal second quarter that ended June 30, 2022, SEM’s revenue increased 5.7% year-over-year to $1.67 million. The company’s net income increased 38.6% year-over-year to $91.86 million, and its earnings per share increased 34.8% year-over-year to $0.61.
SEM’s revenue is expected to rise 3.8% year-over-year to $1.63 billion for the fiscal third quarter ending September 2023. The company’s EPS is expected to increase 93.6% year-over-year to $0.41 for the same quarter.
SEM’s shares have gained 19.9% over the past nine months to close its last trading session at $28.45.
It’s no surprise that SEM has an overall B rating, which equates to a Buy in our POWR Ratings system.
SEM has a B grade for Value, Growth, Stability, and Sentiment. The stock is ranked #3 in the same industry.
To access SEM’s grades for Momentum and Quality, click here.
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HCA shares were trading at $266.10 per share on Thursday afternoon, down $0.95 (-0.36%). Year-to-date, HCA has gained 11.40%, versus a 15.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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