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3 Medical Info System Stocks Braving Industry Headwinds
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In the pre-COVID era, the Medical Information Systems industry was witnessing a gradual upsurge in demand for health IT applications by MedTech providers on the purpose of improving the quality of healthcare and streamline services. The COVID-19 outbreak has led to exponential growth in this industry, thanks to the growing demand for contactless services surrounding the more infectious new virus variants. Market watchers claim that even beyond the pandemic, digital health is expected to maintain this strength as healthcare professionals and patients leverage its benefits. Per a Grand View Research report, the global healthcare information system market size was valued at $359.8 billion in 2021 and is expected to expand at a very-impressive CAGR of 13.2% from 2022 to 2030 on account of rising demand for remote treatment options.
Growing demand for all kind of digital healthcare support, including telehealth, cloud computing, artificial intelligence, robotics and analytics, has created a unique opportunity for companies like Omnicell, Inc. (OMCL - Free Report) , Axonics, Inc. (AXNX - Free Report) and Outset Medical, Inc. (OM - Free Report) . However, there is a counterargument that with the opening up of the global economy despite COVID waves, this trend might get disrupted gradually.
Industry Description
The Zacks Medical Info Systems industry comprises companies, which develop and market healthcare information systems. These companies offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time-efficient manner. Focus on patient satisfaction, security of patient data and administrative cost control has increased the need for big data, 3D printing, blockchain and AI. Industry players like Omnicell and Allscripts are raking in millions from the sale of software and related hardware, professional services and IT outsourcing services, recurring service contracts for software maintenance, and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Contactless Services: Amid the pandemic, the need for contactless services has grown enormously. Within the Medical information systems space, the telehealth and remote patient monitoring segments are particularly growing at a faster rate. Per a Markets and Markets report, the global remote patient monitoring market is projected to reach $117.1 billion by 2025 from $23.2 billion in 2020, seeing a CAGR of 38.2% between 2020 and 2025. Also, realizing the importance of digitization in healthcare, the FDA earlier this year launched the Artificial Intelligence/Machine Learning (AI/ML)-based Software as a Medical Device (SaMD) Action Plan.
Subsiding COVID-19 Cases Might Disrupt the Trend: While COVID-19 has introduced an all-new era of virtual healthcare service, it has also brought in associated pitfalls. A Wall Street Journal report says that major insurers have been rolling back the terms of this virtual care coverage, upon which customers are facing out-of-pocket charges on certain virtual visits. Adding to the complication, thanks to the successful vaccination drives globally, the severity of COVID-19 has been despite the emergence of more infectious variants of the virus. Accordingly, despite a rise in case count over the past few months, social restrictions have been lifted to a significant extent. This has led to a rise in the number of physician office and hospital visits with a significant reduction in demand for virtual physician appointments. Going by a Healthcare Finance report, insurers are currently wondering how virtual care will look and what it will be like when the pandemic is finally in the rearview mirror.
EMR and Blockchain Gain Ground: Among the long-term trends, EHRs, electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence. These have led to the emergence of Internet of Medical Things (IoMT), which has enabled the use of a number of wearables, including ECG and EKG monitors, apart from other common medical measurement devices, to determine temperature, glucose level, and blood pressure readings. The evolution of telemedicine and blockchain is another mega trend worth mentioning here. Leading healthcare companies like Humana, MultiPlan, Quest Diagnostics and UnitedHealth Group’s Optum and UnitedHealthcare formed an alliance to launch the Synaptic Health Alliance pilot project on blockchain.
Rising Instances of Cyber Attacks: As healthcare becomes more wired and interconnected, cybersecurity is the primary concern of hospitals. In fact, security flaws are being increasingly found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems. Indeed, the pandemic has led to growing cyber dependency, which has made the space vulnerable to cyber-attacks. Interpol’s recent report claims that cybercriminals are particularly targeting hospitals, medical centers and public institutions for ransomware attacks as these institutions are already entangled in a healthcare crisis.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #149, which places it in the bottom 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite as well as the sector over the past year.
The industry has declined 59.8% compared with the Zacks Medical sector’s decline of 24.1%. The S&P 500 has dropped 12.3% in the said time frame.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing medical stocks, the industry is currently trading at 2.11X compared with the S&P 500’s 3.26X and the sector’s 1.86X.
Over the last five years, the sector has traded as high as 5.71X, as low as 1.43X, and at the median of 2.82X, as the charts below show.
Price-to-Sales Forward Twelve Months (F12M)
Price-to-Sales Forward Twelve Months (F12M)
3 Medical Info Systems Stocks to Buy
Omnicell: Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions for the medication-use process. These automation solutions contain medication and supply dispensing systems, central pharmacy storage, retrieval and packaging solutions, a bedside automation solution, a physician order management solution, a decision support application, and a web-based procurement application.
Omnicell has accelerated its shift to cloud-based solutions and tech-enabled services through the launches of Omnicell One and Central Pharmacy Dispensing Services. Currently, the company continues to see strong customer demand for Central Pharmacy Dispensing Services and Omnicell One SaaS platform. The company currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 earnings indicates an increase of 4.2% from 2021. Year to date, the stock has declined 37.6% compared with the industry’s 42% plunge.
Price and Consensus: OMCL
Axonics: Based in Irvine, CA., Axonics is a global medical technology company that is developing and commercializing novel products for adults with bladder and bowel dysfunction. Axonics’ sacral neuromodulation (SNM) systems provide patients suffering from overactive bladder and/or fecal incontinence with long-lived, easy-to-use, safe, clinically effective therapy.
As a major positive, the company, in 2022, received FDA approval for its newly developed truly recharge-free SNM system, F15. The company currently holds a Zacks Rank #2. The Zacks Consensus Estimate for 2022 earnings indicates a year-over-year increase of 32.3%. In the past year, the stock has lost 7.1% compared with the industry’s decline of 53.5%.
Outset Medical: Outset is a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis. The Tablo Hemodialysis System, which the FDA cleared for use from the hospital to home, represents a significant technological advancement that transforms the dialysis experience for patients and operationally simplifies it for providers.
According to OM, it continues to see rapidly growing demand for Tablo as an enabling technology for home programs, fueled by the exceptional clinical outcome and overwhelmingly positive patient experiences in retention. The company carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2022 sales indicates year-over-year growth of 31.3%. Year to date, the stock has lost 7.1%.
Price and Consensus: OM
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3 Medical Info System Stocks Braving Industry Headwinds
In the pre-COVID era, the Medical Information Systems industry was witnessing a gradual upsurge in demand for health IT applications by MedTech providers on the purpose of improving the quality of healthcare and streamline services. The COVID-19 outbreak has led to exponential growth in this industry, thanks to the growing demand for contactless services surrounding the more infectious new virus variants. Market watchers claim that even beyond the pandemic, digital health is expected to maintain this strength as healthcare professionals and patients leverage its benefits. Per a Grand View Research report, the global healthcare information system market size was valued at $359.8 billion in 2021 and is expected to expand at a very-impressive CAGR of 13.2% from 2022 to 2030 on account of rising demand for remote treatment options.
Growing demand for all kind of digital healthcare support, including telehealth, cloud computing, artificial intelligence, robotics and analytics, has created a unique opportunity for companies like Omnicell, Inc. (OMCL - Free Report) , Axonics, Inc. (AXNX - Free Report) and Outset Medical, Inc. (OM - Free Report) . However, there is a counterargument that with the opening up of the global economy despite COVID waves, this trend might get disrupted gradually.
Industry Description
The Zacks Medical Info Systems industry comprises companies, which develop and market healthcare information systems. These companies offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time-efficient manner. Focus on patient satisfaction, security of patient data and administrative cost control has increased the need for big data, 3D printing, blockchain and AI. Industry players like Omnicell and Allscripts are raking in millions from the sale of software and related hardware, professional services and IT outsourcing services, recurring service contracts for software maintenance, and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Contactless Services: Amid the pandemic, the need for contactless services has grown enormously. Within the Medical information systems space, the telehealth and remote patient monitoring segments are particularly growing at a faster rate. Per a Markets and Markets report, the global remote patient monitoring market is projected to reach $117.1 billion by 2025 from $23.2 billion in 2020, seeing a CAGR of 38.2% between 2020 and 2025. Also, realizing the importance of digitization in healthcare, the FDA earlier this year launched the Artificial Intelligence/Machine Learning (AI/ML)-based Software as a Medical Device (SaMD) Action Plan.
Subsiding COVID-19 Cases Might Disrupt the Trend: While COVID-19 has introduced an all-new era of virtual healthcare service, it has also brought in associated pitfalls. A Wall Street Journal report says that major insurers have been rolling back the terms of this virtual care coverage, upon which customers are facing out-of-pocket charges on certain virtual visits. Adding to the complication, thanks to the successful vaccination drives globally, the severity of COVID-19 has been despite the emergence of more infectious variants of the virus. Accordingly, despite a rise in case count over the past few months, social restrictions have been lifted to a significant extent. This has led to a rise in the number of physician office and hospital visits with a significant reduction in demand for virtual physician appointments. Going by a Healthcare Finance report, insurers are currently wondering how virtual care will look and what it will be like when the pandemic is finally in the rearview mirror.
EMR and Blockchain Gain Ground: Among the long-term trends, EHRs, electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence. These have led to the emergence of Internet of Medical Things (IoMT), which has enabled the use of a number of wearables, including ECG and EKG monitors, apart from other common medical measurement devices, to determine temperature, glucose level, and blood pressure readings. The evolution of telemedicine and blockchain is another mega trend worth mentioning here. Leading healthcare companies like Humana, MultiPlan, Quest Diagnostics and UnitedHealth Group’s Optum and UnitedHealthcare formed an alliance to launch the Synaptic Health Alliance pilot project on blockchain.
Rising Instances of Cyber Attacks: As healthcare becomes more wired and interconnected, cybersecurity is the primary concern of hospitals. In fact, security flaws are being increasingly found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems. Indeed, the pandemic has led to growing cyber dependency, which has made the space vulnerable to cyber-attacks. Interpol’s recent report claims that cybercriminals are particularly targeting hospitals, medical centers and public institutions for ransomware attacks as these institutions are already entangled in a healthcare crisis.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #149, which places it in the bottom 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite as well as the sector over the past year.
The industry has declined 59.8% compared with the Zacks Medical sector’s decline of 24.1%. The S&P 500 has dropped 12.3% in the said time frame.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing medical stocks, the industry is currently trading at 2.11X compared with the S&P 500’s 3.26X and the sector’s 1.86X.
Over the last five years, the sector has traded as high as 5.71X, as low as 1.43X, and at the median of 2.82X, as the charts below show.
Price-to-Sales Forward Twelve Months (F12M)
Price-to-Sales Forward Twelve Months (F12M)
3 Medical Info Systems Stocks to Buy
Omnicell: Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions for the medication-use process. These automation solutions contain medication and supply dispensing systems, central pharmacy storage, retrieval and packaging solutions, a bedside automation solution, a physician order management solution, a decision support application, and a web-based procurement application.
Omnicell has accelerated its shift to cloud-based solutions and tech-enabled services through the launches of Omnicell One and Central Pharmacy Dispensing Services. Currently, the company continues to see strong customer demand for Central Pharmacy Dispensing Services and Omnicell One SaaS platform. The company currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 earnings indicates an increase of 4.2% from 2021. Year to date, the stock has declined 37.6% compared with the industry’s 42% plunge.
Price and Consensus: OMCL
Axonics: Based in Irvine, CA., Axonics is a global medical technology company that is developing and commercializing novel products for adults with bladder and bowel dysfunction. Axonics’ sacral neuromodulation (SNM) systems provide patients suffering from overactive bladder and/or fecal incontinence with long-lived, easy-to-use, safe, clinically effective therapy.
As a major positive, the company, in 2022, received FDA approval for its newly developed truly recharge-free SNM system, F15. The company currently holds a Zacks Rank #2. The Zacks Consensus Estimate for 2022 earnings indicates a year-over-year increase of 32.3%. In the past year, the stock has lost 7.1% compared with the industry’s decline of 53.5%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: AXNX
Outset Medical: Outset is a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis. The Tablo Hemodialysis System, which the FDA cleared for use from the hospital to home, represents a significant technological advancement that transforms the dialysis experience for patients and operationally simplifies it for providers.
According to OM, it continues to see rapidly growing demand for Tablo as an enabling technology for home programs, fueled by the exceptional clinical outcome and overwhelmingly positive patient experiences in retention. The company carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2022 sales indicates year-over-year growth of 31.3%. Year to date, the stock has lost 7.1%.
Price and Consensus: OM