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Medical Services Boom Drives Healthcare: 3 Top Picks

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The U.S. healthcare space has been raking in billions of late. In fact, data from CMS shows that U.S. health care spending will rise to about $5.5 trillion by 2025, with contribution to GDP reaching almost 20%.

Developments in the form of medical mechatronics, robotics and AI (Artificial Intelligence) have been favorably shaping the Medical Services industry.

Reflecting such factors, the industry has rallied 26.6% in the past six months, outperforming the S&P 500 index’s rise of 8.7%. The current level is also higher than the Medical sector’s increase of 21.1%.

Here we discuss how the Medical Services industry has been creating opportunities for investors.

Primary Medical Services in US

Medical services like Pharmacy Benefit Management (PBM), Electronic Health Record (EHR), specialized care centers and emergency medical services are much in demand. Further, Contract Research Organizations (CRO) form a prime medical service offering in the nation.

Below we discuss a few of such services which are much sought-after.

PBM

PBM reduces prescription drug costs and improves convenience and safety for consumers, employers, unions and government programs.

CVS Health Corporation (CVS - Free Report) and Express Scripts Holding Company are a few key players in the PBM sector. Leading market research company Technavio's analysts predict a 7.2% CAGR for the PBM market in the United States during 2014-2019.

CRO

CROs conduct research on behalf of sponsor companies. The United States has a large number of CROs — starting from small level research organizations to ones with complete in-house lab facilities. Going by a MarketWatch article, the global CRO market is expected to see a CAGR of 11.5% by 2023. A large patient population and changing lifestyle choices are primary catalysts.

Laboratory Corporation of America Holdings (LH - Free Report) is a leading healthcare diagnostics company, providing comprehensive clinical laboratory services and end-to-end drug development support.

EHR

Lastly, EHRs are digital versions of patients’ medical history, diagnoses, medications, treatment plans, immunization dates, allergies, radiology images and test results. Per P&S Market Research, the global EHR market is projected to reach a size of $30.4 billion by 2023.

Cerner Corporation is one of the largest providers of healthcare information technology solutions worldwide. The company’s HealtheIntent is a big data platform which deserves a special mention here.

Choosing the Winning Stocks

Against this backdrop, companies offering medical services are lucrative investment choices for now. We have zeroed in on stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Our first pick is North Carolina-based PRA Health Sciences , a renowned global CRO. This Zacks Rank #2 stock has rallied 36.4% compared with the industry’s 29.6% rise in a year’s time.

The company provides outsourced clinical development services to biotechnology and pharmaceutical industries. Its global clinical development platform includes establishments across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East. Within the company’s Early Development Services, the company has so far conducted studies for major pharmaceutical companies outside the nation, especially in Europe and Japan.

Earlier this year, the company was named the best CRO in Asia.

Next on our list is BioTelemetry, Inc. (BEAT - Free Report) , which provides monitoring services and digital population health management for healthcare providers, medical device manufacturing and centralized core laboratory services for clinical research. The stock flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past year, shares of the company have rallied an impressive 59.2%, outperforming the industry.

Earlier this year, BioTel Care, a BioTelemetry Company presented its next-generation wireless blood glucose monitor for diabetes management. Notably, BioTel Care developed the first FDA-cleared, cellular-enabled glucometer which supports real-time transmission and consolidation of patient data. BioTel Care is also launching its next-generation blood glucose monitor which enables patients to easily test blood glucose levels while capturing additional personal health data.

Investors may also take a look at Medpace Holdings, Inc. (MEDP - Free Report) , which is a scientifically-driven, global, full-service CRO. Notably, this Ohio-based company provides Phase I-IV clinical development services to the biotechnology, pharmaceutical and medical device industries.

The Zacks Rank #1 stock has rallied 80.5% in the past year, outperforming the industry.

The company has a strong presence in oncology and has maintained a diversified portfolio with respect to therapeutic area. The company’s recently reported second-quarter results were largely driven by a robust biotech funding environment, strong net awards and an accelerated pace of existing projects across its portfolio.

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