Lately, the MedTech space has been facing the brunt of frequent regulatory changes. While the Trump administration is faced with a socio-economic upheaval, investors are apprehensive about its impact on stocks.
Historic trends suggest that investor sentiments have always been partially inclined toward fancy brand names in a volatile economic backdrop. As a result, companies with a solid brand value and robust fundamentals generally enjoy a smooth sail even during political turbulence.
One such bigwig from the MedTech space is Abbott Laboratories (ABT - Free Report) , which has greatly evolved over the recent years. The company has pursued a slew of mergers and divestments, and has also seen solid growth in its Diabetics business. Among its strategic buyouts, the acquisitions of CFR Pharmaceuticals, Tendyne Holdings, and St. Jude Medical are worth mentioning
After spinning off its proprietary pharmaceutical products division in 2013 to form AbbVie Inc. (ABBV - Free Report) , Abbott has gained traction in the Established Pharmaceuticals Division. Since then, revenues have seen a CAGR of 7.6% over the last three years. Over this period, the company has more or less reported strong quarterly numbers, indicating fundamental strength.
Shares Lack Luster
However, the share price performance of Abbott has been disappointing over the same time frame. The company represents a meager return of just 19.2%, lower than the broader industry’s gain of 22.3% and the S&P 500’s return of 23.3% over the same time frame.
Of the main issues plaguing Abbott, foreign exchange is a major headwind. The strengthening of the euro and some other developed market currencies have constantly hampered the company’s performance in international markets. Abbott currently expects currency exchange to have a negative impact of around 1% on sales in 2017.
Apart from this, the business environment continues to be challenging across the globe. Slow growth in the nutrition business in China and economic problems in Venezuela are expected to remain unresolved for some time, dampening the company’s top-line growth.
While Abbott boasts solid fundamentals, the company’s prospects are dull. We note that the company promises long-term earnings growth of just 10.7%, lower than the broader industry’s estimated growth rate of 13%. Furthermore, Abbott’s revenues have declined 10.7% in the last five years compared to the broader industry’s revenue growth of 6.1%.
Secondly, Abbott’s historical cash-flow growth has been extremely low at -14.3%, comparing unfavorably with the broader industry’s positive growth of 5.7%. These unfavorable growth metrics are indicative of the fact that despite a solid brand value, Abbott might not prove to be a lucrative pick for the long haul.
4 Growth Stocks in Focus
The long-term growth parameters are not in favor of Abbott, as it holds a Zacks Rank #3 (Hold) now. So instead of opting for brand values, let’s take a look at the following four not-so-fancy MedTech stocks that are expected to gain over the long haul. Apart from flaunting a strong Zacks Rank #1 (Strong Buy) or #2 (Buy), these stocks promise a long-term expected growth rate of 15% or higher, comparing favorably with the broader industry. We also have taken a Growth Style Score of A or B into consideration.
Our Growth Style Score highlights all of the vital metrics of the company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or #2, offer the best investment opportunities.
Lonza Group Ltd (LZAGY - Free Report) : Lonza Group sports a Zacks Rank #1 and has a long-term expected earnings growth rate of 15%. The company has a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lonza Group supplies products and services to the pharmaceutical, biotech, and specialty ingredients markets worldwide. With an outstanding first half of the year, Lonza Group continues to expect strong performances by its Pharma & Biotech and Specialty Ingredients segments.
The company’s strategic initiatives to improve customer relationship management, process innovations, and operational improvement programs in the areas of automation and streamlining instills investor confidence. The stock has gained 115% over the last three years.
OraSure Technologies, Inc. (OSUR - Free Report) : This Zacks Rank #2 stock promises long-term expected earnings growth of 16%. Notably, OraSure has a Growth Style Score of B. The company develops, manufactures, markets and sells oral fluid diagnostic products and specimen collection devices in the United States, Europe and internationally.
OraSure banks on solid growth in its infectious disease business unit. Higher sales of the company’s molecular products and OraQuick HCV product are the primary growth drivers. The company has also been banking on its flagship Oragene product line.
OraSure has had an impressive run over the last three years. The company has returned 161.2%, significantly higher than the broader industry’s 22.09% and the S&P 500’s 22.4% over the same time frame.
IDEXX Laboratories, Inc. (IDXX - Free Report) : This Zacks Rank #2 company continues to demonstrate solid growth globally with strong international expansion. With a long-term expected earnings growth rate of 19.8% and a Growth Score of A, IDEXX Laboratories exited the second quarter of 2017 on a solid note, beating the Zacks Consensus Estimate for both the counts.
Headquartered in Delaware NJ, IDEXX Laboratories is a developer, manufacturer and distributer of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. A major fraction of IDEXX Laboratories’ revenues is derived from its Companion Animal Group segment. Driven by an expanding premium instrument base in the United States and international markets, the company is expected to grow extensively over the long haul.
IDEXX Laboratories boasts a stellar return of 149.4% for the last three years. Furthermore, the estimate revision trend for the next year is promising. Notably, four analysts moved north over the last two months. The Zacks Consensus Estimate for next year increased 2.6% to $3.56 per share over the same time framee.
LeMaitre Vascular, Inc. (LMAT - Free Report) : LeMaitre has a Zacks Rank #2 and promises a long-term expected earnings growth rate of 15%. With a Growth Score of A, the company’s XenoSure platform is a key catalyst at the moment. The stock has gained 428.7% over the last three years.
Headquartered in Burlington, MA, the company markets, sells, services, and supports medical devices and implants for the treatment of peripheral vascular disease worldwide. The company expects its sales to rise almost 3% organically in the next quarter on strong margin expansion.
LeMaitre’s estimate revision trend for the next year is quite encouraging. Notably, four analysts moved north compared to no movement in the opposite direction. As a result, the Zacks Consensus Estimate increased almost 8.9% over the same time frame.
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