The overall backdrop has been pretty favorable for healthcare stocks due to the pandemic. However, some stocks have languished as healthcare spending was actually lower. Many doctor’s offices and hospitals were only open for emergencies. Patients also put off visits and procedures to limit exposure.
Despite this temporary disruption, healthcare is one part of the economy that will continue growing. Due to the aging population in the US, healthcare spending continually trends higher. There is also increasing popular support for “universal healthcare” which will mean that more government resources go towards the sector.
Given these strong fundamentals, investors should pay close attention to the sector. Sorrento Therapeutics, Inc. (SRNE), iRhythm Technologies, Inc. (IRTC), and Fulgent Genetics, Inc. (FLGT) are three lesser-known healthcare stocks which could be valuable additions to your portfolio.
Sorrento Therapeutics, Inc. (SRNE)
SRNE has a high upside potential due to positive developments concerning the testing and treatment for COVID-19. The stock has been rallying, delivering more than 710% return since its March lows.
SRNE has recently announced a licensing agreement with Columbia University for the rights to an efficient one-step onsite diagnostic test that detects the SARS-CoV-2 virus within 30 minutes from saliva samples. Furthermore, SRNE announced the signing of a letter of intent for the acquisition of SmartPharm, a gene-encoded therapeutics company that focuses on antibody-centric therapeutics including Covid-19.
The company received FDA clearance to go ahead with the Phase 2 trial of Abivertinib in COVID-19 patients with moderate to severe pulmonary symptoms. At the beginning of July, SRNE announced the selection of T-VIVA-19 as a targeted protein vaccine candidate for COVID-19 after encouraging preclinical trials.
SRNE’s consensus revenue estimate of $11.53 million for the quarter ended September 2020 indicates a year-over-year increase of 99.6%. Also, the market expects the company to report a loss per share of $0.16 for the quarter ended in September 2020, which represents a significant improvement over the year-ago loss per share of $0.5.
How does SRNE stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #11 out of 344 stocks in the Biotech industry.
iRhythm Technologies, Inc. (IRTC)
IRTC, a digital healthcare company, focused on cardiac care advancement, faced many roadblocks due to the pandemic. It posted a decrease in revenue and gross profit, but there has been a steady improvement in the company’s registration rates in the second quarter. This improvement can be attributed to its digital platform with the capabilities to deliver services during this zero-contact delivery period.
IRTC commented on the Centers for Medicare and Medicaid Services (“CMS”) Calendar Year 2021 Medicare Physician Fee Schedule Proposed Rule. IRTC’s analysis implies that if the proposed rule and new codes are implemented, the company could experience a positive impact on its revenue due to the clinical value of its Zio XT service and wear-time mix.
The market expects the company to report a loss per share of $0.54 for the quarter ended September 2020, which represents a significant improvement over the year-ago loss per share of $0.74. IRTC’s consensus revenue estimate of $60.57 million for the quarter indicates a year-over-year increase of 12.6%. The stock has grown by more than 200% since its March lows.
IRTC’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and Peer Grade and a “B” for Buy & Hold Grade and Industry Rank. Among the 58 stocks in the Medical-Diagnostics Research group, it’s ranked #10.
Fulgent Genetics, Inc. (FLGT)
The launch of FLGT’s FDA Emergency Use authorized RT-PCR test and at-home testing solution for Covid-19 has boosted optimism. The stock has grown about 320% since it hit its 52-week low of $6.70 on March 16th. For the fiscal second quarter ended June 30th, 2020, revenue increased 105% year-over-year and EPS was $0.17 as compared to $0.06 a year ago.
Chief Financial Officer of FLGT Paul Kim said, “Our second-quarter volume increased over 1200% sequentially, and we see the opportunity for continued momentum through the balance of the year. Our traditional genetic testing orders rebounded in June and July and are on track for growth in the second half of 2020. By aggressively applying our technology platform, we democratized and made affordable the needs of COVID-19 testing to the public, resulting in an overall average selling price of less than $100 per test, while shortening our average turnaround time to less than 24 hours from receipt of the sample.”
The market expects the company to report an EPS of $0.27 for the quarter ended September 2020, which represents a 92.9% growth over the year-ago number. FLGT’s EPS is expected to grow 44.5% per annum in the next five years. FLGT’s consensus revenue estimate of $31.42 million for the quarter ended September 2020 indicates a year-over-year increase of 203.7%.
It’s no surprise that FLGT is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Peer Grade and a “B” for Industry Rank. In the 58-stock Medical-Diagnostics/Research industry, it ranks #24.
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SRNE shares fell $0.27 (-1.43%) in after-hours trading Monday. Year-to-date, SRNE has gained 456.80%, versus a 5.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Anmol Suratkal
Anmol began his career as a financial writer and evolved into an investment analyst and journalist with a special interest in risky instruments. He specializes in analyzing financial data and writes insightful articles to help investors generate solid long-term returns. More...
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