The medical industry is well-positioned for growth due to the innovation of medical devices, increasing utilization of clinical diagnostics by healthcare providers, and the rising demand for high-quality healthcare.
Amid this backdrop, it could be wise to buy quality medical stocks CorVel Corporation (CRVL) and Aveanna Healthcare Holdings Inc. (AVAH) today. On the other hand, Carriage Services, Inc. (CSV) could be worth adding to your watchlist.
Technological advancements, such as the development of minimally invasive procedures, advanced materials, and 3D printing, are driving the medical sector’s growth. These innovations are improving the accuracy, efficiency, and effectiveness of medical devices and are creating new treatment options for patients.
The global medical devices market is expected to grow at a CAGR of 6.2% to reach a value of about $965.20 billion by 2031.
Also, the growing adoption of automated platforms for disease prevention, detection, and management represents one of the key factors driving the medical industry. Apart from this, healthcare providers' increasing utilization of clinical diagnostics by healthcare providers to develop targeted therapies through specific and sensitive diagnostic tests is bolstering the market's growth.
The global clinical diagnostics market is expected to reach $124.70 billion by 2028, exhibiting a CAGR of 8.6% until 2028.
In addition, healthcare providers' increasing utilization of clinical diagnostics by healthcare providers to develop targeted therapies through specific and sensitive diagnostic tests is bolstering the medical industry. Further, the escalating demand for personalized medicine among patients is positively influencing the market.
Considering these conducive trends, let's take a look at the fundamentals of the above-mentioned Medical - Services stocks, starting with the stocks to buy.
Stocks to Buy:
Aveanna Healthcare Holdings Inc. (AVAH)
AVAH is a diversified home care platform company that provides pediatric and adult healthcare services in the United States. Its patient-centered care delivery platform allows patients to remain in their homes and minimizes the overutilization of high-cost care settings, such as hospitals.
The company operates through three segments: Private Duty Services (PDS); Home Health & Hospice (HHH); and Medical Solutions (MS).
AVAH’s trailing-12-month levered FCF margin of 0.99% is 291% higher than the industry average of 0.25%, while its trailing-12-month EBIT margin of 4.18% is significantly higher than the industry average of 0.24%.
AVAH’s revenue for the fiscal second quarter ended July 1, 2023, increased 6.5% year-over-year to $471.95 million. Its net income came in at $25.60 million, compared to a loss of $473.89 million in the previous-year quarter. Also, its net income per share came in at $0.13, compared to negative $2.56 in the previous-year quarter.
AVAH’s revenue for the quarter ending September 30, 2023, is expected to increase 2.8% year-over-year to $455.29 million. Also, the company has surpassed revenue estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 68.8% to close the last trading session at $1.40.
It’s no surprise that AVAH has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Sentiment. Within the Medical - Services industry, it is ranked #19 out of 70 stocks.
In addition to the POWR Ratings we’ve stated above, we also have AVAH’s ratings for Growth, Value, Momentum, and Quality. Get all AVAH ratings here.
CorVel Corporation (CRVL)
CRVL provides workers' compensation, auto, liability, and health solutions for employers, third-party administrators, insurance companies, and government agencies to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.
On September 12, 2023, CRVL announced the release of its initial Generative AI module. A new addition to CRVL’s CogencyIQ service offerings, the module will leverage machine learning to interpret medical records for adjusters and prompt immediate action.
CRVL’s trailing-12-month levered FCF margin of 7.90% is significantly higher than the industry average of 0.25%, while its trailing-12-month EBIT margin of 12.12% is significantly higher than the industry average of 0.24%.
CRVL’s revenues increased 7.9% year-over-year to $190.25 million in the fiscal second quarter that ended June 30, 2023. Its net income grew 18.7% from the year-ago quarter to $19.81 million, while its EPS increased 21.3% year-over-year to $1.14.
The stock has gained 42.3% over the past nine months to close the last trading session at $199.49.
CRVL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CRVL is rated a B for Quality and Stability. Within the same industry, it is ranked #18.
Beyond what is stated above, we’ve also rated CRVL for Momentum, Sentiment, Value, and Growth. Get all CRVL ratings here.
Stock to Watch:
Carriage Services, Inc. (CSV)
CSV provides funeral and cemetery services and merchandise in the United States. The company operates through two segments, Funeral Home Operations and Cemetery Operations.
The company’s annual dividend of $0.45 translates to a 1.43% yield on the prevailing prices, while its four-year average dividend yield is 1.26%.
In terms of the trailing-12-month EBIT margin, CSV’s 21.14% is 190.5% higher than the 7.28% industry average. However, its 0.31x trailing-12-month asset turnover ratio is 68.3% lower than the 1x industry average.
For the fiscal second quarter ended June 30, 2023, CSV’s total revenue increased 7.8% year-over-year to $97.68 million. However, its net income declined 24% from the year-ago quarter to $8.29 million. Its adjusted EPS declined 8.6% year-over-year to $0.53.
Street expects CSV’s revenue and EPS for the current quarter (ending September 2023) to increase 6.9% and 11.1% year-over-year to $93.53 million and $0.50, respectively. Moreover, the company surpassed its EPS and revenue estimates in three of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 22.3% but declined 8.3% over the past year to close the last trading session at $31.57.
CSV’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Momentum, Stability, Value, and Quality. It is ranked #20 out of 70 stocks in the same industry.
To access additional ratings for CSV’s Growth and Sentiment, click here.
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CRVL shares were trading at $199.88 per share on Monday afternoon, up $0.39 (+0.20%). Year-to-date, CRVL has gained 37.54%, versus a 17.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
2 Medical Stocks to Buy Today, 1 to Watch StockNews.com
