Healthcare companies have historically demonstrated remarkable resilience and sustained growth, largely attributed to the inelastic demand for their products and services. So, investors could explore quality medical stocks Option Care Health, Inc. (OPCH), PetIQ, Inc. (PETQ), and Viemed Healthcare, Inc. (VMD), which are well poised for growth in the coming months.
The growing favor for care options like home care, nursing homes, hospices, and assisted living facilities within the United States is a driving force behind the expansion of the healthcare sector.
Moreover, the medical technology industry is flourishing, driven by significant technological progress and increased demand for medical devices and diagnostic tools. Forecasts indicate that the sector will reach approximately $570.70 billion in the current year.
In addition, the increasing elderly population in the United States is at higher risk for multiple chronic conditions, contributing to the expected growth of the home healthcare services market. Additionally, the shift in patient preference towards home-based treatment is expected to further stimulate the expansion of this market.
The U.S. Home Healthcare Services market is anticipated to reach $156.28 billion by 2030, expanding at a 7.2% CAGR.
Furthermore, the COVID-19 pandemic accelerated its adoption as telemedicine apps automate tasks, reducing administrative burdens and the need for physical hospital visits. The global remote monitoring systems sector is rising, primarily due to its efficacy in handling chronic conditions, cost-cutting advantages, and its role in averting hospital admissions.
As a result, the global remote patient monitoring system market is expected to expand at a CAGR of 18.5% until 2030.
With these favorable trends in mind, let’s delve into the fundamentals of the three Medical-Services stock picks, beginning with the third choice.
Stock #3: Option Care Health, Inc. (OPCH)
OPCH provides a wide range of home and alternate site infusion services in the United States. They offer treatments for various conditions, including heart failure, immune deficiencies, chronic inflammatory disorders, neurological disorders, bleeding disorders, high-risk pregnancies, and more.
Over the past three years, OPCH’s EBIT and EBITDA rose at a CAGR of 42.1% and 25.4%.
During the fiscal third quarter that ended September 30, OPCH’s net revenue rose 7.1% year-over-year to $1.09 billion. Its operating income increased 33.5% from the previous-year quarter to $81.05 million and adjusted EBITDA grew 28.2% from the year-ago quarter to $109.76 million.
The company’s net income and EPS grew 45% and 47.6% year-over-year to $56.30 million and $0.31.
The consensus EPS estimate of $0.28 indicates a 7.5% year-over-year growth in the fiscal fourth quarter ending December 2023. Its consensus revenue estimate of $1.10 billion for the same quarter represents a 6.6% rise from the previous-year quarter. It has exceeded the revenue and EPS analysts' estimates in each of the trailing four quarters, which is impressive.
The stock decreased marginally intraday to close the last trading session at $27.73.
OPCH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
OPCH has a B grade for Sentiment. It is ranked #11 among 66 stocks in the Medical - Services industry.
Click here to access additional OPCH ratings (Growth, Value, Momentum Quality, and Stability).
Stock #2: PetIQ, Inc. (PETQ)
PETQ operates as a pet medication and wellness company in the United States and internationally. It operates in two segments: Products and Services. The company offers Rx pet medications, diabetes and pain treatments, antibiotics, and specialty medications, develops and manufactures its own proprietary value-branded products, as well as distributes third-party branded medications.
PETQ‘s EBIT and EBITDA grew at a CAGR of 32.4% and 34.3% over the past five years.
During the fiscal second quarter that ended on June 30, 2023, PETQ’s total net sales increased 24.8% year-over-year to $314.55 million. Its gross profit rose 19.2% over the prior-year quarter to $73.88 million. The company’s adjusted net income and EPS rose 36.4% and 39.4% from the prior-year quarter to $13.40 million and $0.46, respectively.
In addition, its adjusted EBITDA came in at $32.87, representing an increase of 36.3% year-over-year.
Analysts expect PETQ’s revenue for the quarter ended September 30, 2023, to increase 9.2% year-over-year to $229.07 million. Its EPS for the quarter ending March 31, 2024, is expected to increase 12.2% year-over-year to $0.51. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
Over the past year, the stock has gained 130.6% to close the last trading session at $18.61. It returned 101.8% year-to-date.
It’s no surprise that PETQ has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has an A grade for Growth and a B for Value and Quality. Within the same industry, it is ranked #8.
To see PETQ’s ratings for Momentum, Stability, and Sentiment click here.
Stock #1: Viemed Healthcare, Inc. (VMD)
VMD provides in-home durable medical equipment (DME) and post-acute respiratory healthcare services to patients. It also offers respiratory disease management solutions to chronic obstructive pulmonary disease (COPD) patients, neuromuscular care, oxygen therapy services, sleep apnea management solutions, and related equipment.
VMD’s revenue and EBITDA grew at a CAGR of 22.9% and 18.1% over the past five years.
In the fiscal second quarter ended June 30, 2023, VMD’s revenue increased 30 year-over-year to $43.31 million. Its gross profit grew 28% year-over-year to $26.11 million. Also, its net income rose 141% and 200% from the previous-year quarter to $2.33 million and $0.06 per share.
VMD’s EPS is expected to increase 183.3% year-over-year to $0.09 in the fiscal third quarter that ended September 2023. Its revenue for the to-be-announced quarter is expected to increase 38.4% year-over-year to $49.50 million. Also, the company has exceeded the EPS estimates in three of the trailing four quarters.
The stock has declined 1.1% over the past year to close the last trading session at $6.16.
VMD’s POWR Ratings reflect solid prospects. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Stability, Sentiment, and Quality. The stock is ranked #4 in the same industry.
In addition to the POWR Ratings grades just highlighted, one can see VMD’s Value and Momentum ratings here.
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OPCH shares were trading at $26.94 per share on Friday afternoon, down $0.79 (-2.85%). Year-to-date, OPCH has declined -10.47%, versus a 8.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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