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3 Medical Info Systems Stocks to Buy as Industry Rebounds
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The past three years of health crisis have led to exponential growth in the Medical Info Systems industry, thanks to the growing demand for contactless services. In the post-pandemic era, the popularity of remote healthcare and a paperless environment have increased further. In fact, in 2023, this industry witnessed massive adoption of artificial intelligence (AI) and the Internet of Medical Things in the form of digital healthcare options in hospitals and other healthcare settings. Apart from being used for the analysis of treatment patterns from a large set of data, AI is currently being extensively used in medical imaging.
GlobalData research projects AI in the medical device market to increase at a CAGR of 29.1% through 2023-2027. The market’s growth will be propelled by the growing demand for healthcare systems to reduce time and costs and improve detection capabilities, particularly when diagnosing a growing number of patients with complex profiles. Subsequently, 80% of health systems claimed to have plans to increase their investment levels in digital health over the next five years (a HIMSS report).
The growing demand for all kinds of digital healthcare support, including telehealth, cloud computing, artificial intelligence, robotics and analytics, has created a unique opportunity for companies like Clover Health Investments (CLOV - Free Report) , Talkspace (TALK - Free Report) and P3 Health Partners (PIII - Free Report) . However, this healthcare system’s excessive dependence on IT comes with its share of risks. Any data disruption in the cloud-based service might lead to a massive loss of information, leading to a breakdown of the system.
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 have 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, and recurring service contracts for software maintenance and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Remote Healthcare: Even though the pandemic is over now, the need for contactless services is growing enormously. Within the medical information systems space, the telehealth and remote patient monitoring segments continue to grow at a fast rate. Going by a Forbes article of 2022, telehealth is likely to stay for long, beyond the pandemic, and will likely be embedded into the healthcare vernacular. A Startechup report in 2023 stated that the use of AI in healthcare is helping medical professionals in several ways, such as speeding up the diagnosis process and automating hospital workflows through robotics, AI-driven chatbots to check symptoms and so on. 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 at a CAGR of 38.2%.
AI and Health: The medical sector is one of the major adopters of AI, which is currently being used to synthesize new compounds for drugs and create devices for more precise measurement and faster and more accurate diagnosis. One common application of AI has been in diagnostic settings, where it quickly and precisely detects image abnormalities that might be challenging for the human eye to spot. Several medical device makers are also developing surgical robots with AI integration for complex and specialized procedures. Further, electronic health records (EHR), electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence.
Distant Healthcare and Insurance Coverage: While COVID-19 has introduced an all-new era of virtual healthcare service, there are some associated pitfalls. A Wall Street Journal report stated 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. Going by a Healthcare Finance report, insurers are still speculative about how virtual care will look in the post-pandemic era. Meanwhile, considering telehealth and remote healthcare as the new normal, many insurance companies are now coming up to alter their coverage area.
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. From October 2023 to December 2023, in a span of just three months, Henry Schein became the victim of back-to-back cyberattacks.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #56, which places it in the top 22% 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 bright 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 7.5% compared with the Zacks Medical sector’s decline of 2.1%. The S&P 500 has risen 24.5% 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 1.3X compared with the S&P 500’s 3.9X and the sector’s 2.4X.
Over the last five years, the sector has traded as high as 12.39X, as low as 1.03X, and at the median of 4.27X, 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 Bet On
Clover Health provides Medicare Advantage plans in the United States. This physician enablement company has a health equity-based focus on seniors who have historically lacked access to affordable, high-quality healthcare. It has a software platform, Clover Assistant, which is designed to aggregate patient data from across the healthcare ecosystem to support clinical decision-making and improve health outcomes through the early identification and management of chronic disease.
Clover Health currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2023 earnings indicates a 36.8% improvement from 2022. For 2024, the company is expected to report earnings growth of 79.2%.
Talkspace, as a virtual behavioral healthcare company, works to help people lead healthier, happier lives through access to high-quality mental healthcare. Talkspace pioneered the ability to text with a licensed therapist from anywhere and now offers a comprehensive suite of mental health services, from self-guided products to individual and couples therapy, in addition to psychiatric treatment and medication management.
Talkspace currently holds a Zacks Rank #2. The Zacks Consensus Estimate for 2023 earings indicates 64.6% growth from 2022. For 2024, the company is expected to report earnings growth of 73.5%.
Price and Consensus: TALK
P3, as a population health management company, is working on improving the lives of both patients and providers. P3 currently has an expansive network of more than 2,600 affiliated primary care providers across the country. The company’s local teams of healthcare professionals manage the care of thousands of patients in 18 counties across five states. P3 supports primary care providers with value-based care coordination and administrative services that improve patient outcomes and lower costs.
P3 currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2023 revenues indicates a 16.7% improvement from 2022. For 2024, the company is expected to report revenue growth of 17.7%.
Price and Consensus: PIII
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3 Medical Info Systems Stocks to Buy as Industry Rebounds
The past three years of health crisis have led to exponential growth in the Medical Info Systems industry, thanks to the growing demand for contactless services. In the post-pandemic era, the popularity of remote healthcare and a paperless environment have increased further. In fact, in 2023, this industry witnessed massive adoption of artificial intelligence (AI) and the Internet of Medical Things in the form of digital healthcare options in hospitals and other healthcare settings. Apart from being used for the analysis of treatment patterns from a large set of data, AI is currently being extensively used in medical imaging.
GlobalData research projects AI in the medical device market to increase at a CAGR of 29.1% through 2023-2027. The market’s growth will be propelled by the growing demand for healthcare systems to reduce time and costs and improve detection capabilities, particularly when diagnosing a growing number of patients with complex profiles. Subsequently, 80% of health systems claimed to have plans to increase their investment levels in digital health over the next five years (a HIMSS report).
The growing demand for all kinds of digital healthcare support, including telehealth, cloud computing, artificial intelligence, robotics and analytics, has created a unique opportunity for companies like Clover Health Investments (CLOV - Free Report) , Talkspace (TALK - Free Report) and P3 Health Partners (PIII - Free Report) . However, this healthcare system’s excessive dependence on IT comes with its share of risks. Any data disruption in the cloud-based service might lead to a massive loss of information, leading to a breakdown of the system.
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 have 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, and recurring service contracts for software maintenance and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Remote Healthcare: Even though the pandemic is over now, the need for contactless services is growing enormously. Within the medical information systems space, the telehealth and remote patient monitoring segments continue to grow at a fast rate. Going by a Forbes article of 2022, telehealth is likely to stay for long, beyond the pandemic, and will likely be embedded into the healthcare vernacular. A Startechup report in 2023 stated that the use of AI in healthcare is helping medical professionals in several ways, such as speeding up the diagnosis process and automating hospital workflows through robotics, AI-driven chatbots to check symptoms and so on. 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 at a CAGR of 38.2%.
AI and Health: The medical sector is one of the major adopters of AI, which is currently being used to synthesize new compounds for drugs and create devices for more precise measurement and faster and more accurate diagnosis. One common application of AI has been in diagnostic settings, where it quickly and precisely detects image abnormalities that might be challenging for the human eye to spot. Several medical device makers are also developing surgical robots with AI integration for complex and specialized procedures. Further, electronic health records (EHR), electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence.
Distant Healthcare and Insurance Coverage: While COVID-19 has introduced an all-new era of virtual healthcare service, there are some associated pitfalls. A Wall Street Journal report stated 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. Going by a Healthcare Finance report, insurers are still speculative about how virtual care will look in the post-pandemic era. Meanwhile, considering telehealth and remote healthcare as the new normal, many insurance companies are now coming up to alter their coverage area.
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. From October 2023 to December 2023, in a span of just three months, Henry Schein became the victim of back-to-back cyberattacks.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #56, which places it in the top 22% 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 bright 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 7.5% compared with the Zacks Medical sector’s decline of 2.1%. The S&P 500 has risen 24.5% 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 1.3X compared with the S&P 500’s 3.9X and the sector’s 2.4X.
Over the last five years, the sector has traded as high as 12.39X, as low as 1.03X, and at the median of 4.27X, 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 Bet On
Clover Health provides Medicare Advantage plans in the United States. This physician enablement company has a health equity-based focus on seniors who have historically lacked access to affordable, high-quality healthcare. It has a software platform, Clover Assistant, which is designed to aggregate patient data from across the healthcare ecosystem to support clinical decision-making and improve health outcomes through the early identification and management of chronic disease.
Clover Health currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2023 earnings indicates a 36.8% improvement from 2022. For 2024, the company is expected to report earnings growth of 79.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CLOV
Talkspace, as a virtual behavioral healthcare company, works to help people lead healthier, happier lives through access to high-quality mental healthcare. Talkspace pioneered the ability to text with a licensed therapist from anywhere and now offers a comprehensive suite of mental health services, from self-guided products to individual and couples therapy, in addition to psychiatric treatment and medication management.
Talkspace currently holds a Zacks Rank #2. The Zacks Consensus Estimate for 2023 earings indicates 64.6% growth from 2022. For 2024, the company is expected to report earnings growth of 73.5%.
Price and Consensus: TALK
P3, as a population health management company, is working on improving the lives of both patients and providers. P3 currently has an expansive network of more than 2,600 affiliated primary care providers across the country. The company’s local teams of healthcare professionals manage the care of thousands of patients in 18 counties across five states. P3 supports primary care providers with value-based care coordination and administrative services that improve patient outcomes and lower costs.
P3 currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2023 revenues indicates a 16.7% improvement from 2022. For 2024, the company is expected to report revenue growth of 17.7%.
Price and Consensus: PIII