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Top 5 Outpatient and Home Healthcare Stocks for Solid Returns
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After navigating a tough pandemic era, the outpatient and home healthcare industry has been seeing steady growth on the back of innovation in services. The industry includes companies that offer ambulatory care in an outpatient setting or at home. They use advanced medical technologies for diagnosis, treatment, and rehabilitation services. These players are operators of HMO medical centers, kidney dialysis centers and other outpatient care centers.
Meanwhile, Wall Street regained momentum in first week of May after April’s meltdown. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 2.6%, 8.1% and 9.4%, respectively.
The Zacks-defined Medical – Outpatient and Home Healthcare Industry is currently in the top 31% of the Zacks Industry Rank. In the past year, the industry has provided 15.3% returns, while its year-to-date return is 4.5%. Since it is ranked in the top half of Zacks Ranked Industries, we expect the consulting services industry to outperform the market over the next three to six months.
Near-Term Drivers
The primary advantage of outpatient clinics is cost-effectiveness. Modern-day outpatient clinics offer a broad spectrum of treatment and diagnostic options and even conduct minor surgical procedures. Financial incentives like health plans and government program payment policies supporting services in lower-cost care settings have also been driving outpatient care.
Artificial Intelligence (AI) has been a great success in the healthcare sector, boosting the outpatient and home healthcare space. Outpatient companies prefer bots and automated techniques for managing health information. With the help of AI, hospitals have been achieving better outcomes, with patients receiving more efficient and personalized care.
The outpatient industry has been generating huge profits from Electronic Health Records and ePrescriptions. The most visible area where AI can make a significant difference is in mental healthcare at home.
The rising demand for remote patient monitoring (RPM) has considerably driven the demand for wearable technology to monitor patient’s health. Although wearables have been popular for several years, their integration with AI has recently increased their popularity.
Wearables have become a powerful home healthcare tool. AI technology-powered RPM enables healthcare firms to provide consistent patient care without occupying space in their hospitals and facilities, thus reducing overcrowding.
Our Top Picks
We have narrowed our search to outpatient and home healthcare stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
DaVita Inc. (DVA - Free Report) has been expanding its global presence via its Integrated Kidney Care business. DVA has been generating solid revenues by providing dialysis services. DVA has been opening and acquiring several dialysis centers both within the United States and overseas, which is promising. The strong solvency position of DVA is an added plus.
Zacks Rank #1 DaVita has an expected revenue and earnings growth rate of 3.5% and 12%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last seven days.
Option Care Health Inc. (OPCH - Free Report) provides infusion and home care management solutions. OPCH offers products, services and condition-specific clinical management programs for gastrointestinal abnormalities, infectious diseases, cancer, organ and blood cell transplants, bleeding disorders and heart failures.
OPCH markets its services through patient referrals, including physicians, hospital discharge planners, hospital personnel, health maintenance organizations, and preferred provider organizations.
Zacks Rank #1 Option Care Health has an expected revenue and earnings growth rate of 10.7% and 15.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last seven days.
Addus HomeCare Corp. (ADUS - Free Report) is a comprehensive provider of a broad range of social and medical services in the home. ADUS operates its business through two divisions, home & community services and home health services.
ADUS’ services include personal care and assistance with activities of daily living, skilled nursing and rehabilitative therapies, and adult day care. ADUS’ consumers are individuals with special needs who are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled.
Zacks Rank #2 Addus HomeCare has an expected revenue and earnings growth rate of 7.9% and 6.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 60 days.
Encompass Health Corp. (EHC - Free Report) provides post-acute healthcare services in the United States and Puerto Rico. EHC continues to witness consistent growth, backed by planned bed additions to existing hospitals and the construction of new hospitals.
EHC expects to make bed additions in the range of 80-120 over the 2025-2027 period. EHC's solid cash-generating abilities enable business investments and prudent deployment of capital.
Zacks Rank #2 Encompass Health has an expected revenue and earnings growth rate of 10.3% and 11.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 30 days.
The Pennant Group Inc. (PNTG - Free Report) provides healthcare services in the United States and operates in two segments, namely, Home Health and Hospice Services, and Senior Living Services. PNTG operates home health, hospice, and home care agencies, as well as senior living communities throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin, and Wyoming.
PNTG offers home health services, including clinical services, such as nursing, speech, occupational and physical therapy, medical social work, and home health aide services; and hospice services comprising clinical care, education, and counseling services for the physical, spiritual, and psychosocial needs of terminally ill patients and their families.
Zacks Rank #2 The Pennant Group has an expected revenue and earnings growth rate of 11.5% and 19.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 60 days.
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Top 5 Outpatient and Home Healthcare Stocks for Solid Returns
After navigating a tough pandemic era, the outpatient and home healthcare industry has been seeing steady growth on the back of innovation in services. The industry includes companies that offer ambulatory care in an outpatient setting or at home. They use advanced medical technologies for diagnosis, treatment, and rehabilitation services. These players are operators of HMO medical centers, kidney dialysis centers and other outpatient care centers.
Meanwhile, Wall Street regained momentum in first week of May after April’s meltdown. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 2.6%, 8.1% and 9.4%, respectively.
The Zacks-defined Medical – Outpatient and Home Healthcare Industry is currently in the top 31% of the Zacks Industry Rank. In the past year, the industry has provided 15.3% returns, while its year-to-date return is 4.5%. Since it is ranked in the top half of Zacks Ranked Industries, we expect the consulting services industry to outperform the market over the next three to six months.
Near-Term Drivers
The primary advantage of outpatient clinics is cost-effectiveness. Modern-day outpatient clinics offer a broad spectrum of treatment and diagnostic options and even conduct minor surgical procedures. Financial incentives like health plans and government program payment policies supporting services in lower-cost care settings have also been driving outpatient care.
Artificial Intelligence (AI) has been a great success in the healthcare sector, boosting the outpatient and home healthcare space. Outpatient companies prefer bots and automated techniques for managing health information. With the help of AI, hospitals have been achieving better outcomes, with patients receiving more efficient and personalized care.
The outpatient industry has been generating huge profits from Electronic Health Records and ePrescriptions. The most visible area where AI can make a significant difference is in mental healthcare at home.
The rising demand for remote patient monitoring (RPM) has considerably driven the demand for wearable technology to monitor patient’s health. Although wearables have been popular for several years, their integration with AI has recently increased their popularity.
Wearables have become a powerful home healthcare tool. AI technology-powered RPM enables healthcare firms to provide consistent patient care without occupying space in their hospitals and facilities, thus reducing overcrowding.
Our Top Picks
We have narrowed our search to outpatient and home healthcare stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
DaVita Inc. (DVA - Free Report) has been expanding its global presence via its Integrated Kidney Care business. DVA has been generating solid revenues by providing dialysis services. DVA has been opening and acquiring several dialysis centers both within the United States and overseas, which is promising. The strong solvency position of DVA is an added plus.
Zacks Rank #1 DaVita has an expected revenue and earnings growth rate of 3.5% and 12%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last seven days.
Option Care Health Inc. (OPCH - Free Report) provides infusion and home care management solutions. OPCH offers products, services and condition-specific clinical management programs for gastrointestinal abnormalities, infectious diseases, cancer, organ and blood cell transplants, bleeding disorders and heart failures.
OPCH markets its services through patient referrals, including physicians, hospital discharge planners, hospital personnel, health maintenance organizations, and preferred provider organizations.
Zacks Rank #1 Option Care Health has an expected revenue and earnings growth rate of 10.7% and 15.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last seven days.
Addus HomeCare Corp. (ADUS - Free Report) is a comprehensive provider of a broad range of social and medical services in the home. ADUS operates its business through two divisions, home & community services and home health services.
ADUS’ services include personal care and assistance with activities of daily living, skilled nursing and rehabilitative therapies, and adult day care. ADUS’ consumers are individuals with special needs who are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled.
Zacks Rank #2 Addus HomeCare has an expected revenue and earnings growth rate of 7.9% and 6.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 60 days.
Encompass Health Corp. (EHC - Free Report) provides post-acute healthcare services in the United States and Puerto Rico. EHC continues to witness consistent growth, backed by planned bed additions to existing hospitals and the construction of new hospitals.
EHC expects to make bed additions in the range of 80-120 over the 2025-2027 period. EHC's solid cash-generating abilities enable business investments and prudent deployment of capital.
Zacks Rank #2 Encompass Health has an expected revenue and earnings growth rate of 10.3% and 11.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the last 30 days.
The Pennant Group Inc. (PNTG - Free Report) provides healthcare services in the United States and operates in two segments, namely, Home Health and Hospice Services, and Senior Living Services. PNTG operates home health, hospice, and home care agencies, as well as senior living communities throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin, and Wyoming.
PNTG offers home health services, including clinical services, such as nursing, speech, occupational and physical therapy, medical social work, and home health aide services; and hospice services comprising clinical care, education, and counseling services for the physical, spiritual, and psychosocial needs of terminally ill patients and their families.
Zacks Rank #2 The Pennant Group has an expected revenue and earnings growth rate of 11.5% and 19.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 60 days.