In addition to concerns over looming interest rate hikes, the Russia-Ukraine war has been fostering immense volatility in the stock market. However, considering the solid growth prospects of the healthcare industry on the back of rising demand from an aging population and continuing research breakthroughs, it could be wise to bet on fundamentally sound stocks from this sector on their current price dips.
The healthcare sector is known for stability because of the near-inelastic demand for healthcare solutions. Furthermore, rising capital inflows for R&D projects worldwide since the onset of the COVID-19 pandemic should keep driving the industry’s growth. Investors’ interest in the industry is evident in the Health Care Select Sector SPDR ETF’s (XLV) 1.7% gains over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. And the global consumer healthcare market is expected to grow at an 8.6% CAGR to $6.65 trillion by 2028.
Given this backdrop, we think it could be wise to invest in fundamentally sound healthcare stocks Gilead Sciences, Inc. (GILD), Smith & Nephew plc (SNN), Qiagen N.V. (QGEN), Dr. Reddy's Laboratories Limited (RDY), and Mednax, Inc. (MD), which are currently trading near their 52-week lows and at significant discounts to their peers.
Click here to checkout our Healthcare Sector Report for 2022
Gilead Sciences, Inc. (GILD)
GILD is a research-based biopharmaceutical company that discovers, develops, and commercializes medicines in areas of unmet medical need. The company’s primary focus areas include treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases, and cardiovascular conditions. GILD is headquartered in Foster City, Calif.
On February 11, 2022, GILD released data demonstrating the in vitro activity of Veklury (remdesivir) against 10 SARS-CoV-2 variants, including Delta and Omicron. Veklury directly inhibits viral replication inside host cells by targeting the SARS-CoV-2 RNA-dependent RNA polymerase. The study analyzed nearly 6 million publicly available variant isolate sequences and confirmed that the nsp12 protein, the RNA polymerase target of Veklury, is highly conserved across all variants. GILD expects to gain widespread recognition for Veklury in the coming months.
GILD had cash and cash equivalents of $5.34 billion as of Dec. 31, 2021. Over the past three months, the stock has declined 11.1% in price and closed Friday’s trading session at $61.86, which was 4.5% higher than its 52-week low of $59.18. GILD’s trailing-12-month gross profit margin, ROE, and ROTC are 79.8%, 31.6%, and 14.3%, respectively.
GILD’s 3.90x forward EV/Sales is 12.9% lower than the 4.48x industry average. In terms of forward Price/Sales, GILD is currently trading at 3.16x, which is 40.8% lower than the 5.35x industry average.
GILD’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B grade for Quality. Click here to see the additional ratings for GILD’s Momentum, Growth, Sentiment, and Stability.
GILD is ranked #18 of 433 stocks in the F-rated Biotech industry.
Smith & Nephew plc (SNN)
Based in London, SNN is a medical technology company that manufactures and sells medical devices and services in orthopedics, endoscopy, and advanced wound management. It primarily serves healthcare providers.
On Feb. 21, 2022, SNN announced the commercial launch of CORI Surgical System, its next-generation handheld robotics platform, in Japan. The robotic solution incorporates 3-D intraoperative imaging with an advanced robotic precision milling tool to sculpt the bone and preserve anatomy in ligament sparing procedures. Because the orthopedic market for robotic-assisted surgery in Japan is forecast to grow at a 37.3% CAGR from 2020 - 2027, the launch of the CORI Surgical System should witness surging demand in the future.
For its fiscal 2021 fourth quarter, ended December 31, 2021, SNN’s total revenues increased 1.5% year-over-year to $1.35 billion. In its fiscal year 2021, the company’s revenues came in at $5.21 billion, representing a 14.3% rise from the prior-year period. Its adjusted operating profit came in at $936 million, indicating a 37% year-over-year improvement. SNN’s adjusted net profit was $710 million, up 25.9% from the prior-year period. Its EPS increased 25.2% year-over-year to $0.81. As of December 31, 2021, the company had $1.29 billion in cash and cash equivalents.
The $1.26 consensus EPS estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents a 7.9% year-over-year improvement. SNN has gained 2.4% in price over the past three months and ended Friday’s trading session at $33.23, which was 5.3% higher than its 52-week low of $31.55. Its trailing-12-month gross profit margin, ROE, and ROTC are 70.4%, 9.7%, and 4.2%, respectively.
In terms of forward EV/Sales, SNN is currently trading at 3.04x, which is 32.1% lower than the 4.48x industry average. And in terms of forward Price/Sales, SNN is currently trading at 2.67x, whi9ch is 50.1% lower than the 5.35X industry average.
SNN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. Click here to see the additional ratings for SNN (Momentum, Growth, and Sentiment).
SNN is ranked #3 of 166 stocks in the Medical - Devices & Equipment industry.
Qiagen N.V. (QGEN)
Based in the Netherlands, QGEN provides solutions that transform biological materials into valuable molecular insights worldwide. It provides its workflows to customers in Molecular Diagnostics, Applied Testing (forensics, veterinary testing, and food safety), pharmaceutical and biotechnology companies, and Academia (life sciences research).
On March 2, 2022, QGEN announced a new two-year licensing agreement with NHS England and NHS Improvement, a U.K.-based publicly funded healthcare system, to deploy QGEN’s HGMD Online Professional, the largest, human-certified curated resource for finding disease-causing genetic variants, to support scientists and clinicians across its NHS Laboratory Hubs network with clinical reporting and interpretation of genomic data. This supports NHS’ ongoing mission to expand the diversity and reach of genomics in the U.K. to enable faster, more comprehensive genomic testing on a national scale. QGEN should benefit from the growing demand in the near term.
For its fiscal year 2021 fourth quarter, ended December 31, 2021, QGEN’s net sales increased 2% year-over-year to $582.40 million. The company’s adjusted operating income came in at $199.30 million, up 1.4% from the prior-year period. QGEN’s adjusted net income was $171 million, indicating a 7.2% year-over-year improvement. Its adjusted EPS increased 8.8% year-over-year at $0.74. The company had $880.52 million in cash and cash equivalents as of Dec. 31, 2021.
The $0.71 consensus EPS estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents an 8.3% rise from the prior-year period. QGEN surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is estimated to be $589.59 million for the same quarter, indicating a 4% year-over-year improvement. Analysts expect the company’s EPS to grow at a 10.4% rate per annum over the next five years.
Over the past three months, the stock has declined 14.8% in price to close Friday’s trading session at $46.20, up 1.4% from its 52-week low of 45.58. QGEN’s trailing-12-month gross profit margin, ROE, and ROTC are 67.9%, 17.4%, and 8.5%, respectively.
In terms of trailing-12-month EV/EBITDA, QGEN is currently trading at 12.85x, which is 26.6% lower than the 17.51x industry average QGEN’s 5.05x forward Price/Sales is 5.6% lower than the 5.35x industry average.
QGEN’S POWR Ratings reflect its solid prospects. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Stability, Sentiment, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for QGEN’s Growth and Momentum here.
QGEN is ranked #1 of 54 stocks in the Medical - Diagnostics/Research industry.
Dr. Reddy's Laboratories Limited (RDY)
Headquartered in Hyderabad, India, RDY operates worldwide as an integrated pharmaceutical company. The company operates through Global Generics; Pharmaceutical Services and Active Ingredients (PSAI); Proprietary Products, and Others segments. Its therapeutic categories primarily include gastrointestinal, cardiovascular, anti-diabetic, dermatology, oncology, respiratory, stomatology, urology, and nephrology.
On Feb. 11, 2022, RDY entered an exclusive sales and distribution agreement with Novartis International AG’s (NVS) Novartis India Limited (NIL) for the Voveran range, the Calcium range, and Methergine in India. The company will use its strengths in promotion and distribution to expand its engagement with healthcare professionals to enable access to patients in need and strengthen its portfolio in the pain management and women’s health areas.
For its fiscal year 2022 third quarter, ended Dec. 31, 2021, RDY’s revenues increased 7.8% year-over-year to $715 million. The company’s gross profit came in at $385 million, indicating a 7.8% rise from the prior-year period. Its income from operations was $124 million, up 313.3% from the prior-year period. While its net income increased 3066.7% year-over-year to $95 million, its EPS increased 2750% to $0.57. As of December 31, 2021, the company had $295 million in cash and cash equivalents.
The $0.68 consensus EPS estimate for its fiscal year 2022 fourth-quarter, ending March 31, 2022, indicates a 49% year-over-year improvement. Analysts expect the company’s revenue to reach $713.07 million for the same quarter, representing a 24.1% improvement from the year-ago period.
Over the past three months, the stock has declined 18.8% in price and ended Friday’s trading session at $49.16, which was 1.6% higher than its 52-week low of $48.41. RDY’s trailing-12-month gross profit margin, ROE, and ROTC are 53.3%, 14.6%, and 10.6%, respectively.
In terms of forward EV/Sales, RDY is currently trading at 2.96x, which is 33.9% lower than the 4.48x industry average. RDY’s 2.99x forward Price/Sales is 44.1% lower than the 5.35x industry average.
RDY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Stability. Click here to see the additional ratings for RDY (Quality, Sentiment, and Momentum).
RDY is ranked #19 of 180 stocks in the Medical - Pharmaceuticals industry.
Mednax, Inc. (MD)
Sunrise, Fla.-based MD provides newborn, maternal-fetal, pediatric cardiology, and other pediatric subspecialty care services in the U.S. and Puerto Rico. It offers neonatal care services, such as clinical care to babies born prematurely or with complications within specific units at hospitals through neonatal physician subspecialists, neonatal nurse practitioners, and other pediatric clinicians. As of Feb. 17, 2022, it operated a network of approximately 2,700 physicians.
On March 2, 2022, MD announced that its affiliated practices would adopt the Pediatrix Medical Group, Inc. brand, a patient-centered, physician-led organization nationwide. This will reflect MD’s commitment to providing highly specialized health care for women, babies, and children.
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, MD’s net revenue increased 19.7% year-over-year to $498.53 million. The company’s income from operations came in at $68.01 million for the quarter, representing a 110.5% increase from the year-ago period. MD’s adjusted net income increased 112.4% year-over-year to $44.70 million. Its adjusted EPS came in at $0.52, up 108% from the prior-year period. And as of December 31, 2021, the company had $387.39 million in cash and cash equivalents.
The $0.27 consensus EPS estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents a 12.5% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to reach $472.46 million for the same quarter, indicating an 11.4% rise from the prior-year period. The company’s EPS is expected to grow at a 26.7% rate per annum over the next five years.
MD stock has declined 9% in price over the past three months and ended Friday’s trading session at $22.99, which was 2.6% higher than its 52-week low of $22.41. Its trailing-12-month gross profit margin, ROE, and ROTC are 26.9%, 13.1%, and 6%, respectively.
In terms of forward EV/Sales, MD is currently trading at 1.27x, which is 71.6% lower than the 4.48x industry average. MD’s 0.98x forward Price/Sales is 81.7% lower than the 5.35x industry average.
MD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Growth, and a B grade for Value. Click here to see the additional ratings for MD (Momentum, Quality, Stability, and Sentiment).
MD is ranked #20 of 84 stocks in the Medical - Services industry.
Click here to checkout our Healthcare Sector Report for 2022
GILD shares were trading at $60.31 per share on Monday afternoon, down $1.55 (-2.51%). Year-to-date, GILD has declined -16.94%, versus a -11.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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