The stock market witnessed wild swings last year amid soaring inflation, the Fed’s monetary tightening, and geopolitical issues. While inflation has been showing signs of slowing down, raising the possibility of slower rate hikes ahead, rate increases are expected to continue in the months to come.
Some experts now see chances of the economy achieving a ‘soft landing.’ However, the recession possibility cannot be ruled out.
“US Recession fears are resurfacing as Federal Reserve policymakers flagged that more rate rises are ahead, even though inflation is coming down from dizzying heights and slowing activity is taking a toll on big companies,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said.
Despite the macroeconomic uncertainties, the healthcare industry is expected to thrive well due to inelastic demand for their goods and services. According to a JPMorgan survey, 91% of healthcare executives expect their revenues to hold steady or increase in 2023.
Additionally, digital healthcare has been gaining traction, with the global Digital Healthcare Market expected to grow at a 23.7% CAGR until 2030. Investors’ interest in healthcare stocks is evident from the Health Care Select Sector SPDR’s (XLV) 3.5% returns over the past three months.
Humana Inc. (HUM)
HUM and its subsidiaries operate as a health and well-being company in the United States. It operates through three segments: Retail; Group and Specialty; and Healthcare Services.
HUM’s forward EV/Sales of 0.65x is 84.5% lower than the industry average of 4.15x. Its forward Price/Sales of 0.67x is 85.8% lower than the industry average of 4.74x.
Its trailing-12-month EBITDA margin of 4.81% is 29.1% higher than the industry average of 3.73%, while its trailing-12-month asset turnover ratio of 1.90% is 458.9% higher than the industry average of 0.34%.
For its fiscal year 2022 third quarter that ended September 30, 2022, HUM’s total revenues came in at $22.80 billion, up 10.2% year-over-year. Its premiums revenue increased 8% year-over-year to $21.47 billion. Also, its services revenue came in at $1.16 billion, representing an increase of 37.2% year-over-year.
Analysts expect HUM’s revenue to increase 9.7% year-over-year to $102.05 billion in 2023. Its EPS is expected to increase by 14.7% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 32% to close the last trading session at $500.35.
HUM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to a Strong Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Growth, Value, and Quality. It is ranked #2 out of 11 stocks in the A-rated Medical – Health Insurance industry. Click here for HUM’s additional POWR Ratings for Momentum, Stability, and Sentiment.
NextGen Healthcare, Inc. (NXGN)
NXGN provides healthcare technology solutions in the United States. The company offers clinical care solutions, patient engagement solutions, integrated clinical care, financial solutions, interoperability solutions, and data and analytics solutions.
NXGN’s forward EV/Sales of 1.73x is 58.2% lower than the industry average of 4.15x. Its forward Price/Sales of 1.83x is 61.4% lower than the industry average of 4.74x.
NXGN’s trailing-12-month EBITDA margin of 5.57% is 49.6% higher than the industry average of 3.73%. Its trailing-12-month asset turnover ratio of 0.97% is 185.3% higher than the industry average of 0.34%.
NXGN’s total revenues came in at $161.88 million for the fiscal 2023 third quarter that ended December 31, 2022, up 8.1% year-over-year. Its non-GAAP net income increased % year-over-year to $17.57 million, up 6.7% year-over-year, while its non-GAAP EPS came in at $0.26, up 8.3% year-over-year.
Street expects NXGN’s revenue to increase 7.3% year-over-year to $639.67 million in the current fiscal year. Its EPS is expected to increase by 4.5% per annum for the next five years. NXGN’s shares have lost marginally intraday to close the last trading session at $17.08.
It’s no surprise that NXGN has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Growth and a B for Value and Quality.
InfuSystem Holdings, Inc. (INFU)
INFU and its subsidiaries provide infusion pumps and related products and services in the United States and Canada. The company operates in two segments, Integrated Therapy Services (ITS) and Durable Medical Equipment Services (DME Services).
In terms of forward EV/Sales, INFU’s forward EV/Sales of 2.12x is 49% lower than the industry average of 4.15x. Its forward Price/Sales of 1.78x is 62.5% lower than the industry average of 4.74x.
INFU’s trailing-12-month gross profit margin of 57.40% is 3.8% higher than the industry average of 55.29%. Its trailing-12-month asset turnover ratio of 1.11% is 224.5% higher than the industry average of 0.34%.
INFU’s net revenues came in at $27.28 million for the third quarter that ended September 30, 2022, up 2.7% year-over-year. Its net income came in at $443 million compared to a loss of $448 million in the year-ago period. Moreover, its EPS came in at $0.02 compared to a loss per share of $0.02 in the previous-year period.
INFU’s revenue is expected to increase 9.6% year-over-year to $122.60 million in 2023, while its EPS is expected to grow 525% year-over-year to $0.25. Over the past month, the stock has gained 16% to close the last trading session at $9.86.
INFU has an overall A grade, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Sentiment and a B for Growth, Stability, and Quality.
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HUM shares were unchanged in premarket trading Wednesday. Year-to-date, HUM has declined -2.31%, versus a 4.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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