3 best healthcare stocks to buy for January
Hhealthcare can be a wonderful industry for investors. It is worth trillions of dollars worldwide and has a constant need for innovation. People will always seek cures for disease and a better quality of life.
But the stock market can sometimes do things that don’t make sense, including selling emerging healthcare stocks that are bringing new business models and technologies to the industry. The three companies below are unpopular now, but they could eventually be good for patients and your wallet – and it’s a real win-win for all.
1. Teladoc Health
Telemedicine has been a big theme during COVID, especially during the height of shutdowns when patients were either scared or at risk of infection, opting instead to connect digitally with healthcare providers. Teladoc Health (NYSE: TDOC) has played a significant role in meeting this need and has grown rapidly as a result. In 2020, revenue increased by 98% compared to 2019, while the number of digital visits increased by 156%.
Recently, the growth has started to slow as people get vaccinated and return to their physical care providers. However, it seems highly likely that telehealth will always have a place in our broader healthcare system. Digital care can help patients in remote areas or those who live far from a specialist they need.
Teladoc’s business goes beyond simply viewing patients on a screen. The company has just launched Primary360, an integrated suite of digital care products to cover all areas of a patient’s needs, including primary care, mental health and chronic disease.
The stock has fallen steadily throughout 2021, taking it to a price-to-sales (P/S) ratio of just 6.5, below its pre-COVID valuation before business ramped up dramatically. spectacular. But management expects revenue growth of 25% to 30% per year through 2024, and I think the stock price could follow that rate of growth because the valuation has become so depressed.
2. Health for him and her
Some might argue that telehealth is a commodity, so companies need to create customer value in other ways. Health for him and for her (NYSE: HIMS) puts consumer branding on health care. It targets (often younger) people with telemedicine services for a host of potentially embarrassing conditions like hair loss and erectile dysfunction, then sells them supplements and medications on a subscription plan.
The company went public a year ago by merging with a SPAC (Special Purpose Acquisition Company). Hims & Hers has beaten analysts’ revenue estimates every quarter as a public company and recently raised its full-year 2021 revenue forecast by 29% to $265 million.
However, the stock has fallen over 60% in the past year despite this growth. Investors might be concerned about the competitive landscape. There is nothing exclusive about Hims & Hers or what it sells. There are competitors, both private (like Roman) and publicly listed (like healthcare giant UnitedHealth Group).
But instead of fearing the competition, I would look at the level of execution shown by management. CEO Andrew Dudum noted in the company’s third quarter 2021 earnings call that 88% of customers remain on the platform from year two through year three. In other words, customers don’t leave.
The stock is currently trading at a low single-digit P/S ratio and management expects revenue to grow around 78% this year, so it appears there is a favorable risk/reward in Hims & Hers.
Oncology is a huge niche in healthcare, as cancer kills almost 10 million people each year. Novocure Limited (NASDAQ: NVCR) has developed a medical device that disrupts the growth of tumor cells by exposing them to controlled electric fields. This technology is currently used to treat patients with glioblastoma and mesothelioma.
These conditions are less common than other types of cancer, which limits the potential use of the Novocure device. However, the company is pending approval with the Food and Drug Administration (FDA) for more common cancers like non-small cell lung cancer, the most common form of cancer – about 84% of the 2.3 million lung cancer patients diagnosed each year are non-small cell.
If Novocure received FDA approval for non-small cell lung cancer, it would significantly increase the company’s potential market. Glioblastoma affects approximately 250,000 people worldwide each year, or only one-tenth of non-small cell lung cases. Novocure’s device is patented, making it the only company to own this device. If widely adopted to treat other types of cancer, almost all of that growth would go to Novocure.
The stock has fallen steadily over the past year, down 55%. Additionally, Novocure’s net income declined further due to its spending on FDA approvals for new types of cancer. The good news for investors is that Novocure generates free cash flow, which helps fund research and development.
Without a significant catalyst, the share price could drift for now as Novocure’s existing business specializes in a rare type of cancer. But receiving FDA approval for non-small cell lung treatments would be a game-changer for the company, so investors who want to own the stock should consider buying it ahead of the FDA decision sometime in the future. of 2022. At its current level, the stock could present a solid opportunity.
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Justin Pope is owner of Hims & Hers Health, Inc. The Motley Fool owns and recommends Novocure and Teladoc Health. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.