As multiple coronavirus variants continue to be identified, and as the aging population grows and chronic diseases rise, the healthcare industry is expected to attract increasing investor attention. Investors’ interest in this space is evident in the Health Care Select Sector SPDR Fund’s (XLV) 15.1% year-to-date returns.

Last month, the Biden administration allotted nearly $1 billion in American Rescue Plan Funds to modernize Health Centers and support Underserved Communities. This should further drive the industry’s growth. Furthermore, because the healthcare sector is relatively stable, it could be wise to bet on quality healthcare stocks amid the current market volatility.

Takeda Pharmaceutical Company Limited (TAK) and ICU Medical, Inc. (ICUI) are two fundamentally sound healthcare stocks that could generate massive returns in the coming months. They have an A grade for Growth in our POWR Ratings system. So, it could be wise to add these stocks to one’s portfolio now.

Click here to checkout our Healthcare Sector Report for 2021

Takeda Pharmaceutical Company Limited (TAK)

Headquartered in Japan, TAK researches, develops, manufactures, markets, and out-licenses pharmaceutical products worldwide. It offers pharmaceutical products in the areas of gastroenterology, oncology, neuroscience, and certain rare diseases.

In June 2021, TAK announced that its product, ALUNBRIG, could be used for first-line treatment of patients with non-small cell lung cancer who are ALK fusion gene-positive as determined by the companion diagnostic ALK fusion protein kit, Ventana OptiView ALK in Japan. This development could help increase the company’s revenue.

For its fiscal first quarter, ended June 30, 2021, TAK’s total revenue increased 18.4% year-over-year to $8.55 billion. Its operating profit came in at $2.24 billion, up 48.6% year-over-year. Its net profit for the period was $1.24 billion, representing a 66.9% year-over-year rise. Also, its EPS increased 66% year-over-year to $0.79. In addition, its revenue and EPS have grown at CAGRs of 23.6% and 21.4%, respectively, over the past three years.

TAK’s revenue is expected to be $29.66 billion for its fiscal period ending March 2022, representing a 434.9% year-over-year rise. The company’s EPS is expected to increase 30% year-over-year to $0.88 for its fiscal period ending March 2023. It is trading 1.7% above its 52-week low of $13.91, which it hit on October 18, 2021, to close yesterday’s session at $14.14.

It’s no surprise that TAK has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

In addition, it has an A grade for Growth and Value, and a B grade for Stability. TAK is ranked #9 of 503 stocks in the Biotech industry. Click here to see the additional POWR Ratings for TAK (Momentum, Sentiment, and Quality).

Click here to checkout our Healthcare Sector Report for 2021

ICU Medical, Inc. (ICUI)

ICUI, together with its subsidiaries, develops, manufactures, and sells medical devices used in infusion therapy and critical care applications worldwide. The San Clemente, Calif., company is dedicated primarily to a singular purpose—improving the safety and efficiency of IV therapy.

On September 8, ICUI agreed to acquire Smiths Medical division from Smiths Group plc. Paul Keel, the CEO of Smiths, commented, “We are focused on concluding this superior transaction and on driving Smiths Group forward, delivering on our significant potential as a leading industrial technology group united by shared purpose, business characteristics, and a common operating model.”

ICUI’s total revenues increased 6% year-over-year to $321.68 million for its second quarter, ended June 30, 2021. Its gross profit came in at $123.53 million, up 16.2% year-over-year. While its net income increased 50.2% year-over-year to $28.4 million, its EPS increased 48.9% to $1.31. Also, its net income and EPS have grown at CAGRs of 6.4% and 6%, respectively, over the past three years.

Analysts expect ICUI’s revenue to be $1.30 billion in its fiscal year 2022, representing a 3.8% year-over-year rise. The company’s EPS is expected to increase 10.2% year-over-year to $7.75 in the next year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 21.7% to close yesterday’s trading session at $231.62.

ICUI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system.

ICUI has an A grade for Growth, and a B grade for Value and Sentiment. It is ranked #11 of 180 stocks in the Medical – Devices & Equipment industry. Click here to see the additional POWR Ratings for Quality, Stability, and Momentum for ICUI.

Click here to checkout our Healthcare Sector Report for 2021

TAK shares were trading at $13.98 per share on Thursday afternoon, down $0.16 (-1.13%). Year-to-date, TAK has declined -23.19%, versus a 22.15% 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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