The unprecedented advancements made in the field of healthcare over the past year—including virtual care solutions for patients—have made it one of the most rapidly evolving industries with tremendous growth potential.
According to Statista, the U.S. healthcare industry’s profits are expected to grow approximately 5% per annum through 2024, with the fastest growth in medtech and healthcare IT. Analysts expect the global digital health monitoring market to grow at a 39% CAGR over the next three years to exceed $254.50 billion.
However, given the fast-paced macroeconomic recovery and bullish stock markets, investors have rotated out of healthcare to invest in technology and outdoor stocks. Consequently, promising healthcare stocks Hologic, Inc. (HOLX) and Owens & Minor, Inc. (OMI) are currently trading at discounted valuations despite possessing solid growth attributes. So, these two stocks could be solid bets now.
Hologic, Inc. (HOLX)
HOLX is a Bedford, Mass.-based healthcare company that develops, manufactures, and supplies diagnostics products, medical imaging systems, and surgical products. The company operates through four segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health.
On June 17, HOLX acquired Mobidiag Oy, an innovator in near-patient, acute care molecular diagnostic testing. The acquisition should enable the company to further strengthen its position in the global diagnostic market.
The company has an impressive growth history. HOLX’s revenues have improved at an 18.6% CAGR over the past three years, while EBIT increased at a 65.3% CAGR over this period. Its EBITDA has improved at a 40.9% CAGR over the past three years.
HOLX’s revenues increased 103.4% year-over-year to $1.54 billion in its fiscal second quarter, ended March 27. Its income from operations grew 409.5% from its year-ago value to $796.8 million, while its net income improved 553.4% year-over-year to $619.4 million over the period. The company’s EPS increased 561.1% year-over-year to $2.38.
A $5.22 billion consensus revenue estimate for the current year indicates a 38.2% improvement from the last year. Analysts expect the company’s EPS to come in at $7.61 in the current year, indicating a 91.2% rise year-over-year. Furthermore, HOLX surpassed the Street’s EPS estimates in three of the trailing four quarters.
HOLX’s impressive earnings estimate and immense growth potential indicate relative undervaluation of the stock at its current price level. In terms of forward P/E, HOLX is currently trading at 10.86x, which is 66.8% lower than the 32.66x industry average. Its 3.40 forward Price/Sales multiple is 57.9% lower than the 8.09 industry average. HOLX has gained 19.9% over the past year. The stock has gained 9.1% over the past month to close yesterday’s trading session at $69.18.
HOLX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HOLX has an A grade for Growth and Value, and a B grade for Quality and Sentiment. It is ranked #17 of 185 stocks in the Medical – Devices & Equipment industry.
Beyond what we’ve stated above, we have also rated HOLX for Momentum and Stability. Click here to view all HOLX ratings.
Owens & Minor, Inc. (OMI)
OMI is a healthcare solutions company that operates through two segments, Global Solutions and Global Products. The company provides vital supply chain services to healthcare providers and manufacturers of healthcare products. OMI won the 2021 Supplier Legacy Award and the COVID-19 Award for Most Supportive Supplier on June 15. OMI is based in Mechanicsville, Va.
OMI’s EBIT has increased at a 37.5% CAGR over the past three years, while its net income increased at a 21.2% CAGR over the period. Its EPS has improved at a 35.4% CAGR over the past three years.
OMI’s net revenue increased 9.6% year-over-year to $2.33 billion in its fiscal first quarter, ended March 31. Its operating income grew 1,263.8% from its year-ago value to $146.69 million. OMI’s net income came in at $69.59 million, indicating a 714.5% rise year-over-year. The company’s EPS increased 615.8% year-over-year to $0.98.
The Street expects OMI’s revenues to rise 15.6% year-over-year to $9.8 billion in the current year. A $3.97 consensus EPS estimate for the current year indicates a 75.7% improvement year-over-year. OMI also surpassed the Street’s EPS estimates in three of the trailing four quarters.
Given OMI’s impressive growth potential, its current price level indicates undervaluation. In terms of forward P/E, OMI is currently trading at 13.42x, which is 58.9% lower than the 32.66x industry average. In terms of forward Price/Sales multiple, OMI is trading at 0.35 which is 95.7% lower than the 8.09 industry average. Its shares have gained 520.5% over the past year, and 67% year-to-date.
It’s no surprise that OMI has an overall B rating, which equates to Buy in our POWR Ratings system. OMI has an A grade for Growth and Value. It is ranked #49 in the same industry.
To see additional POWR Ratings for Sentiment, Stability, Momentum, and Quality, click here.
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HOLX shares were trading at $68.62 per share on Tuesday afternoon, down $0.56 (-0.81%). Year-to-date, HOLX has declined -5.78%, versus a 17.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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