Top healthcare stocks this month include Ardelyx Inc., 89Bio Inc., and Verona Pharma PLC, whose stock prices have all more than doubled in the last year despite market jitters.
Healthcare stocks—represented by the Health Care Select Sector SPDR ETF (XLV), an exchange-traded fund (ETF)—fell 7% over the past year, compared with a 13% decline for the Russell 1000.
Here are the top three healthcare stocks in each category displaying the best value, fastest growth, and most momentum. Benchmark data are as of March 30, while company data below are as of March 27, 2023.
Best Value Healthcare Stocks
These are the healthcare stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
| Best Value Healthcare Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/E Ratio | |
| Theravance Biopharma Inc. (TBPH) | 10.79 | 0.7 | 0.9 |
| Azenta Inc. (AZTA) | 42.43 | 2.9 | 1.5 |
| Intercept Pharmaceuticals Inc. (ICPT) | 13.83 | 0.6 | 2.1 |
Source: YCharts
- Theravance Biopharma Inc.: Theravance discovers and markets therapeutics for respiratory disease, bacterial infections, and other conditions. In late February, Theravance said it would cut costs by discontinuing certain research lines and cutting its workforce by about 17%.
- Azenta Inc: Azenta is a life sciences company providing sample and genomic services including drug development, sample and material storage, and clinical trial management. Its customers include pharmaceutical, biotechnology, and life sciences research companies.
- Intercept Pharmaceuticals Inc.: Intercept is a biopharmaceutical company that develops and sells products to treat chronic liver diseases. Intercept’s net loss in the final quarter of 2022 narrowed to $20.8 million from $36.3 million a year earlier.
Fastest-Growing Healthcare Stocks
These are the top healthcare stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
| Fastest-Growing Healthcare Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| ShockWave Medical Inc. (SWAV) | 217.92 | 8.0 | 991.2 | 71.1 |
| Supernus Pharmaceuticals Inc. (SUPN) | 36.40 | 2.0 | 975.0 | 5.2 |
| Healthcare Services Group Inc. (HCSG) | 13.48 | 1.0 | 633.3 | 0.8 |
Source: YCharts
- ShockWave Medical Inc.: ShockWave makes intravascular devices, balloon dilatation catheters, and other products for patients with cardiovascular disease. ShockWave’s revenue increased by nearly three-quarters for the last quarter of 2022, which the company attributed to increased sales of its C2 catheters in the U.S. and greater international reach.
- Supernus Pharmaceuticals Inc.: Supernus is a pharmaceutical company that develops and sells treatments for central nervous system diseases and disorders, epilepsy, Parkinson’s, ADHD, and more. Net earnings increased tenfold to $25 billion in the last quarter of 2022. Sales of Supernus’ ADHD drug Qelbree surged 228% from the prior year amid a nationwide Adderall shortage.
- Healthcare Services Group Inc.: Healthcare Services Group is a housekeeping, laundry, facility maintenance, and food services company serving nursing homes, hospitals, and retirement centers across 48 states.
Healthcare Stocks With the Most Momentum
These are the healthcare stocks that had the highest total return over the past 12 months.
| Healthcare Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Ardelyx Inc. (ARDX) | 4.32 | 0.9 | 307.5 |
| 89Bio Inc. (ETNB) | 16.35 | 0.9 | 294.9 |
| Verona Pharma PLC (VRNA) | 20.35 | 1.6 | 283.2 |
| Russell 1000 Index | N/A | N/A | -12.5 |
| Health Care Select Sector SPDR ETF (XLV) | N/A | N/A | -7.7 |
Source: YCharts
- Ardelyx Inc.: Ardelyx is a maker of biotechnological drugs to correct metabolism disorders and imbalances. Shares dropped 75% from $7.70 to $1.93 in July 2021 after the FDA rejected the company’s request to expand the label of its drug tenapanor. The company is appealing the decision, and its shares have jumped several times in the last year on favorable developments.
- 89Bio Inc.: 89Bio is a biopharmaceutical firm that creates drug treatments for liver and metabolic disorders. In late March, the company sold 16.9 million shares to raise about $275 million as part of a secondary offering.
- Verona Pharma PLC: Verona is a British biopharma company that develops and markets therapeutics for respiratory diseases.
Key Trends in Healthcare
The pandemic and technological advances have accelerated several key trends across the healthcare sector that provide potential opportunities for investors, among them telehealth and healthcare wearables.
Telehealth: Telehealth connects patients with health professionals using video calls and health apps. Such services allow people in less-served regional areas or those who can’t easily travel to access medical advice in their homes or workplaces.
A survey conducted by the Bipartisan Policy Center showed that 63% of respondents had used telehealth as a preventative service, for a prescription refill, or for a routine visit for a chronic illness. Moreover, eight in 10 surveyed said their primary health issue was resolved and that they would likely use telehealth in the future. Investors can gain exposure to telehealth through stocks including Teladoc Health Inc. (TDOC), Doximity Inc. (DOCS), and American Well Corp. (AMWL).
Healthcare Wearables: Wearable electronic devices allow consumers or patients to wear technology that collects their personal health and fitness data. Healthcare wearables can send a user’s health information in real-time to a doctor or other health professional for regular monitoring.
Some of the more popular healthcare wearable devices are smart health watches, electrocardiogram (ECG) monitors, blood pressure monitors, and biosensors. A survey conducted by Insider Intelligence found U.S. consumers’ use of healthcare wearables increased to 33% in 2022 from 9% four years earlier. Key stocks involved in healthcare wearables include Garmin Ltd. (GRMN), Wearable Health Solutions Inc. (WHSI), and Apple Inc. (AAPL).
Advantages of Healthcare Stocks
An aging baby boomer population creating additional demand for medical products and services underpins growth expectations for the healthcare sector. According to the Centers for Medicare and Medicaid Services, U.S. national healthcare expenditure is expected to reach $6.2 trillion by 2028.
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