The COVID-19 pandemic caused significant financial chaos through 2020. Due to the pandemic-led economic disruption, the MedTech sector had been severely affected by widespread panic selling of stocks. Especially, the subsectors with non-COVID elective support were hit the hardest.
However, since the beginning of 2021, with the ramped up rollout of vaccines, there’s hope that the economy will gradually return to normalcy. In March 2021, the Federal Reserve significantly upgraded the United States’ economic growth forecast to 6.5% for 2021, up sharply from its previous projection in December of 4.2%.
While theories about impending new waves of the pandemic are still doing the rounds, the MedTech space is expected to remain resilient banking on transformation of business models according to changing demand pattern, inclination toward AI-driven remote healthcare and a number of fiscal stimulus packages that the government has introduced of late.
MedTech Biggies in Discounted Territory
The deferral of various non-essential procedures and medical requirement amid the pandemic affected MedTech companies to a large extent last year. Orthopedic and dental practices, which majorly depend on surgical procedures and preventive treatments, were the worst-affected due to the widespread stay-at-home orders and postponement of elective surgical procedures and treatments due to fear of contracting the infection.
Per a report by Dentistry iQ, collected revenues in dental practices declined 6% in 2020.
In line with this,
Align Technology ( ALGN Quick Quote ALGN - Free Report) , which deals in dental supplies, witnessed a sharp decline in segmental revenues in second-quarter 2020. Revenues for both clear aligners and imaging systems and CAD/CAM services declined as practitioners dealt with office closures due to COVID-19. Per a report by GlobalData, the global orthopedic market lost more than $4.8 billion in revenues since the outbreak of COVID-19. It estimates that 15-30% of elective surgeries were canceled due to measures put in place to prevent the spread of COVID-19.
The widespread and stretched panic selling of stocks within these subsectors of MedTech over the past few quarters dragged down share prices significantly, making fundamentally-sound stocks dirt cheap. It is to be noted that during the pre-pandemic period, most of such stocks were actually expensive based on their otherwise robust long-term growth parameters in a normal scenario.
3 Stocks to Pick Now
Given that fundamentally-strong stocks are now available at a discounted rate, it will be wise for investors to consider such stocks for long-term benefits. It has been noted that growth stocks outshine value stocks during economic downturns. However, as the economy starts to pick up post the pandemic-led economic mayhem, value stocks are gradually expected to outperform the market.
Vaccine distribution is well under way and the end of the pandemic is in sight. Nevertheless, there are great companies trading at steep discounts which will benefit from the return to normalcy.
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 Zacks #1 Rank stocks here.
Listed below are three stocks that investors can consider during these uncertain times.
Henry Schein, Inc.’s ( HSIC Quick Quote HSIC - Free Report) robust first-quarter 2021 performance resulting from strength in three operating arms along with solid international results buoys optimism. The company boosted its dental business with the acquisition of a majority ownership position in eAssist Dental Solutions and Jarvis Analytics in June and May, respectively. Also in May, the company’s Henry Schein One announced the availability of a new software module that integrates dental and medical patient records. Henry Schein, Inc. Price and Consensus
In addition to sporting a Zacks Rank of 1, the stock has a Value Score of A. In terms of PEG ratio, the stock is trading at 1.66, lower than the industry average of 1.79. Moreover, the stock’s forward price-to-earnings ratio stands at 18.63 versus the industry average of 22.21. The company’s earnings per share are expected to grow 35.7% year over year in 2021.
UnitedHealth Group Incorporated’s ( UNH Quick Quote UNH - Free Report) revenues have grown consistently over the past years. It has witnessed a CAGR of 5.1% from 2015 to 2020. In the first quarter of 2021, the same was up 9%. We believe the company should retain its revenue momentum in the years ahead on the back of its strong market position and attractive core business that continues to be driven by new deals, renewed agreements and expansion of service offerings. For 2021, the company expects revenues near $280 billion, which indicates 8.9% growth from the 2020 reported number. UnitedHealth’s health subsidiary – Optum – partnered with Bassett Healthcare Network to Offer Better Care in Central New York. UnitedHealth Group Incorporated Price and Consensus
In addition to carrying a Zacks Rank of 2, the stock has a Value Score of B. In terms of Cash/Price ratio, the stock is trading at 0.06, lower than the industry’s average of 0.24. Moreover, the stock’s earnings yield stands at 4.78% versus the industry average of 5.34%. The company’s earnings per share are expected to grow 10.3% year over year in 2021.
Phibro Animal Health Corporation’s ( PAHC Quick Quote PAHC - Free Report) solid Performance Products segment growth on strong demand for copper-based products drove revenues in third-quarter fiscal 2021. Growth in international market of dairy products amid the post-pandemic recovery is impressive. Further, the company’s fourth-quarter fiscal 2021 financial guidance calls for year-over-year revenue growth. Phibro is currently focusing on new developments along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. Phibro Animal Health Corporation Price and Consensus
In addition to carrying a Zacks Rank of 2, the stock has a Value Score of B. In terms of PEG ratio, the stock is trading of 2.19, lower than the industry’s average of 2.23. Moreover, the stock’s Cash/Price stands at 0.08 versus the industry average of 0.10. The company’s earnings per share are expected to grow 16.7% year over year in 2021.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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