The top healthcare stocks this month include TransMedics Group Inc., Verona Pharma PLC, and Ardelyx Inc., whose stock prices have more than tripled in the last year despite inflation and recessionary trends.
Healthcare stocks—represented by the Health Care Select Sector SPDR ETF (XLV), an exchange-traded fund (ETF)—fell 3% over the past year, compared with a 5% 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 7, while company data below are as of March 1, 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) | 10.80 | 0.7 | 0.9 |
| Azenta Inc. (AZTA) | 43.89 | 3.0 | 1.6 |
| iTeos Therapeutics Inc. (ITOS) | 17.71 | 0.6 | 2.6 |
Source: YCharts
- Theravance Biopharma Inc.: Theravance discovers and markets therapeutics for respiratory disease, bacterial infections, and other conditions. Activist investor Irenic Capital, which owns a 4.2% stake in Theravance, recently pushed for a review of strategic alternatives including a full sale of the company and a board shake-up.
- Azenta Inc: This 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.
- iTeos Therapeutics Inc.: iTeos is a clinical-stage biopharma company that develops immuno-oncology therapeutics for customers in the U.S. and Belgium.
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 2,500% were excluded as outliers.
| Fastest-Growing Healthcare Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Signify Health Inc. (SGFY) | 28.79 | 6.8 | 1,846 | 232.2 |
| ShockWave Medical Inc. (SWAV) | 190.24 | 6.9 | 991.2 | 71.1 |
| Healthcare Services Group Inc. (HCSG) | 13.27 | 1.0 | 633.3 | 0.8 |
Source: YCharts; Pfizer Inc.
- Signify Health Inc.: Signify offers healthcare payment programs to governments, employers, health systems, health plans, and physicians that cover millions of people. Its major customers include the U.S. government’s Medicare program. In early September, Signify announced that it would be acquired by CVS Health for about $8 billion in cash. The transaction is expected to close in the first half of 2023.
- ShockWave Medical Inc.: Shockwave makes intravascular devices, balloon dilatation catheters, and other products for patients with cardiovascular disease. Fourth quarter revenue of $144 million was up almost three quarters from the prior year, driven in part by increased purchase volume of ShockWave’s C2 catheters in the U.S.
- Healthcare Services Group Inc.: Healthcare Services Group is a housekeeping, laundry, facility maintenance, and food services company serving nursing homes, hospitals, and retirement centers across 48 states.
Healthcare Stocks With the Most Momentum
These are the healthcare stocks that had the highest total return over the past 12 months.
| Healthcare Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| TransMedics Group Inc. (TMDX) | 80.07 | 2.6 | 332.3 |
| Verona Pharma PLC (VRNA) | 21.44 | 1.3 | 281.5 |
| Ardelyx Inc. (ARDX) | 2.88 | 0.5 | 274.0 |
| Russell 1000 Index | N/A | N/A | -5.0 |
| Health Care Select Sector SPDR ETF (XLV) | N/A | N/A | -2.6 |
Source: YCharts
- TransMedics Group Inc.: TransMedics is a biotech company providing transplant therapy for end-stage organ failure patients.
- Verona Pharma PLC: Verona is a British biopharma company that develops and markets therapeutics for respiratory diseases. In December, the company reported positive results from a Phase 3 trial of its drug ensifentrine for patients with chronic obstructive pulmonary disease.
- Ardelyx Inc.: Ardelyx is a maker of biotechnological drugs to correct metabolism disorders and imbalances.
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
In the wake of the pandemic, the healthcare sector will likely get further public and private investment, helping drive innovation and profits. Moreover, an aging baby boomer population continues to underpin the space, creating additional demand for medical products and services. According to the Centers for Medicare and Medicaid Services, U.S. national healthcare expenditure is expected to reach $6.2 trillion by 2028, highlighting the sector’s size.
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