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Buy 4 Beaten-Down MedTech Value Stocks Amid September Selloffs

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The unrelenting spread of coronavirus wreaked havoc on most U.S. sectors. The real GDP, which fell at an annual rate of 31.7%, was a crucial parameter for determining the pandemic’s impact. Unemployment rate in the month of August, which although fell to 8.4% from April’s 14.7%, remained pretty high due to widespread inter-industry shutdowns in this period. In fact, based on the U.S. Department of Labor’s September-released data, real unemployment rate in August was more than 11% (per a CNBC report), raising investors’ apprehensions.

For many market watchers, the rescue packages and other financial stimuluses announced during this period weren’t enough to check the economy’s fall. The recent decision to reduce unemployment benefits adds to the concerns. Also, the fresh bout of coronavirus cases and bleak prospects of an effective vaccine are making the situation worse.

In wake of this bearishness, most benchmarks have touched record lows this month since March.

MedTech Scenario

The U.S. MedTech sector has so far presented a mixed response to the pandemic. On one hand, companies engaged in the production of critical care products like ResMed (RMD - Free Report) have reaped stupendous gains. The company’s business was significantly boosted by strength in demand for ventilators and ventilation mask systems. Over the past year, the company’s share price has surged 33.5% against the industry’s 1.9% fall.

On the other hand, companies which solely rely on elective surgical procedures or oncology-related work have seen the worst. A notable example is Myriad Genetics (MYGN - Free Report) , which is a key player in the cancer diagnostics space. Over the past year, the company’s share price has plummeted 52.6% against the industry’s 13.8% rise.

Investing in Value Stocks: Best Strategy for Long-Term Benefit

The widespread market meltdowns in September led to panic selloffs of MedTech stocks too. This dragged down the prices of even fundamentally strong stocks and pushed them into the Value territory. Hence, it will be prudent for investors to consider these fundamentally strong yet beaten-down value stocks which are currently available in never-seen-before prices. Notably, these stocks were actually expensive in the pre-pandemic period due to their otherwise robust long-term growth parameters.

4 Stocks to Buy

Given that fundamentally-strong stocks are now available at a cheaper rate, it will be prudent for investors to consider such stocks for long-term benefits. It has been observed that growth stocks outshine value stocks during economic downturns. However, when the economy picks up pace post the pandemic-led economic mayhem, value stocks are expected to outperform the market.

To narrow down the list, we have selected those with a Value Style Score of A or B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

Listed below are four companies that investors can consider during these trying times.

Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) is a key integrated provider of products and services for dialysis patients. In July, this Zacks Ranked #2 company, with a Value Score of A, reported solid second-quarter results. A wide range of dialysis products and services raises optimism over the stock. Management expects to undertake meaningful investments in 2020 to capitalize on opportunities and optimize cost base. Per the postulates of the ‘Growth Strategy 2020’, the company aims to boost revenues to $28 billion by 2020.

Its EV/EBITDA ratio stands at an impressive rate of 6.89 against the industry’s negative ratio. Further, its Earnings Yield or E/P ratio is 6.3% against the industry’s negative ratio. Over the past six months, the stock has gained 35.9% compared with the industry’s 48.6% rise.

Renowned dialysis services provider DaVita Inc.’s (DVA - Free Report) acquisition of several dialysis centers overseas and a solid guidance for 2020 are encouraging. The company presently sports a Zacks Rank #1 and has a Value Score of A. Further, it launched the DaVita Venture Group in May. Through this, it plans to accelerate efforts to develop and deploy solutions aimed at improving the health care and quality of life for patients suffering from kidney diseases and related chronic conditions.

The stock’s P/B ratio is 4.60 compared with the industry’s 3.18. Further, its Earnings Yield or E/P ratio is 7.7% compared with the industry’s yield of 2.2%. Over the past six months, the stock has gained 22.4% compared with the industry’s 35.7% rise.

NextGen Healthcare, Inc. (NXGN - Free Report) , a key provider of software and services, is a Zacks Rank #2 company with a Value Score of B. The company exited the first quarter of fiscal 2021 on a strong note, with earnings and revenues beating estimates. Through the fiscal first quarter, the company continued gaining from the Topaz acquisition. The NextGen Virtual Visits and NextGen Enterprise also gained significant momentum during the fiscal first quarter. The launch of the NextGen Patient Experience Platform instills optimism on the stock.

Its EV/EBITDA ratio stands at an impressive rate of 12.94 against the industry’s negative ratio. Further, its Earnings Yield or E/P ratio is 5.9% against the industry’s negative ratio. Over the past year, the stock has lost 15.5% against the industry’s 30.1% rise.

Renowned travel healthcare staffing company AMN Healthcare Services, Inc. (AMN - Free Report) exited the second quarter on a strong note, with earnings and revenues beating estimates. The company, which presently carries a Zacks Rank #2 and has a Value Score of B, launched the latest version of AMN Passport mobile app in August to enable travel nurses and allied professionals nationwide find, book and manage their assignments. Management is upbeat about the company’s latest Stratus Video and Advanced Medical buyouts, which are expected to expand its travel as well as school therapy and travel nurse staffing capabilities.

Its EV/EBITDA ratio stands at an impressive rate of 14.58 compared with the industry’s 0.51. Further, its Earnings Yield or E/P ratio is 5.6% compared with the industry’s 2.5%. Over the past year, the stock has gained 2.3% compared with the industry’s 25.1% rise.

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