Despite the headwinds of high inflation, restrictive monetary policies, and a tight job market, the healthcare sector has remained resilient thanks to the inelastic demand for its products and services. Given the industry’s defensive characteristics and long-term prospects, investors could look to buy fundamentally strong healthcare stocks Herbalife Nutrition Ltd. (HLF) and Zynex, Inc. (ZYXI).
Moreover, amid advances in medical science and significant investments in research, the healthcare industry is witnessing solid growth. According to Statista, revenue in the healthcare segment is expected to grow at a CAGR of 12.9% to $27.67 billion by 2027. Given the rapidly aging population and the rise of chronic diseases, the healthcare industry is expected to keep growing.
Furthermore, healthcare stocks offer investors a protective hedge against a recession as people cannot cut back on their healthcare expenditures irrespective of an economic cycle. Investors’ interest in healthcare stocks is evident from the Health Care Select Sector SPDR’s (XLV) 5% returns over the past month.
Amid this backdrop, investors could benefit from buying fundamentally strong healthcare stocks HLF and ZYXI.
Herbalife Nutrition Ltd. (HLF)
HLF offers health and wellness products in North America, Mexico, South and Central America, Europe, the Middle East, Africa, China, and the rest of Asia Pacific. The company provides products in the areas of weight management; targeted nutrition; energy, sports, and fitness; outer nutrition; and literature and promotion items.
In terms of the trailing-12-month gross profit margin, HLF’s 44.98% is 43% higher than the 31.46% industry average. Its 6.17% trailing-12-month net income margin is 73.8% higher than the 3.55% industry average. Likewise, its 1.87x trailing-12-month asset turnover ratio is 118.4% higher than the industry average of 0.86x.
For the fiscal fourth quarter ended December 31, 2022, HLF’s operating income increased 5.5% year-over-year to $88.90 million. Its net income increased 42.4% year-over-year to $54.4 million. Additionally, its EPS came in at $0.55, representing a 48.6% increase from the year-ago period.
HLF’s EPS and revenue for fiscal 2024 are expected to increase 15.2% and 2% year-over-year to $3.56 and $5.02 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has fallen 6.3% year-to-date to close the last trading session at $14.25.
HLF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Quality. It is ranked #3 out of 7 stocks in the A-rated Medical - Consumer Goods industry.
We have also given HLF grades for Growth, Momentum, Stability, and Sentiment. Get all HLF ratings here.
Zynex, Inc. (ZYXI)
ZYXI designs, manufactures, and markets medical devices to treat chronic and acute pain and activate and exercise muscles for rehabilitative purposes with electrical stimulation. The company offers NexWave, NeuroMove, InWave, and E-Wave.
In terms of the trailing-12-month gross profit margin, ZYXI’s 79.99% is 43.7% higher than the 55.65% industry average. Its 1.27x trailing-12-month asset turnover ratio is 265.8% higher than the 0.35x industry average. Likewise, its 16.48% trailing-12-month EBITDA margin is significantly higher than the industry average of 1.92%.
ZYXI’s total net revenue for the fiscal year ended December 31, 2022, increased 21.4% year-over-year to $158.17 million. Its net income came in at $17.05 million. The company’s total liabilities declined 15.6% year-over-year to $50.11 million. Also, its net EPS remained unchanged at $0.44.
ZYXI’s EPS for the quarter ending September 30, 2023, is expected to increase 5.1% year-over-year to $0.14. Its revenue for the quarter ended March 31, 2023, is expected to increase 27.5% year-over-year to $39.61 million.
It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 60.8% to close the last trading session at $11.50.
ZYXI’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock is ranked #4 in the same industry. Additionally, it has an A grade for Quality and a B for Value.
To see the additional ratings of ZYXI for Growth, Momentum, Stability, and Sentiment, click here.
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HLF shares were trading at $14.64 per share on Wednesday afternoon, up $0.70 (+5.02%). Year-to-date, HLF has declined -1.61%, versus a 6.79% 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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