Investors have commenced 2020 with caution and apprehension, thanks to the looming atmosphere of uncertainty prevailing at the moment. The investment world is particularly wary of the end to the ongoing bull market, which witnessed the longest bull-run till July 2019. Further, the 59th presidential election, scheduled in late 2020, and related political uproar are only aggravating the uncertainty present in the equity market.
In 2019, the MedTech industry witnessed an impressive on the back of increased healthcare awareness and purchasing power in the emerging markets, exceptional progress in innovation and technological advancement.
However, the U.S.-China trade war, which resulted in both the countries levying tariffs worth thousands of billions of dollars on each other, dragged on for almost 18 months and was a dampener. Nonetheless, investors are looking forward to a brighter 2020 and have pinned hopes on the recent “phase one” trade deal between the United States and China, which has hopefully put a break in the trade war.
Meanwhile, per a report by Fitch Solutions published on MedTech Dive, the U.S. medical device market is expected to see a CAGR of 4.9% over the coming years that can exceed $200 billion in 2023.
MedTech Sector: 2020 Looks Promising
In 2019, top MedTech companies increased R&D spending across the board. This is likely to continue in 2020 as well. Higher R&D expenditure is putting more MedTech products into a faster approval cycles, thereby leading to more new products being marketed. According to a report by MedTech Dive, total MedTech R&D spending is projected to improve by 4.5% at $39 billion by 2024.
Moreover, value-based payment or outcomes-based pricing and reimbursement models that join prices to value are garnering attention. These models will help providers, payers and patients to get the best outcomes at the lowest cost.
Further, interest in digital health is palpable from significant growth in investments in the space over the last five years. Geriatric population with prevalence of chronic diseases and current and upcoming changes to regulations and reimbursements will drive adoption of digital health services and technologies in 2020 and beyond.
Interestingly, In-vitro Diagnostics (IVD) has been gaining prominence. IVD has been a game changer when it comes to early detection of a patient’s health condition and the risk associated with the same, thereby resulting in creation of new opportunities for early intervention and prevention. According to Medical Device and Diagnostic Industry, IVD is likely to become a niche in the industry by 2020, accounting for 14.1%, or $67.3 billion in sales.
Why Growth Stocks?
Taking into account the aforementioned trends, the MedTech industry appears to be a lucrative investment proposition for 2020. The industry’s momentum is expected to continue through year on sustained demand strength across major end-markets and significant capital investment. Amid such a backdrop, it would be a prudent idea to invest in MedTech stocks with compelling growth prospects if you are looking to reap solid returns from your portfolio in 2020.
5 MedTech Growth Stocks in Focus
Here we will take a look into five growth stocks are fundamentally strong businesses that ensure solid portfolio returns. We have used the Zacks Growth Score to pick such stocks. Our research shows that stocks with the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities.
You can see the complete list of today’s Zacks #1 Rank stocks here.
We have taken the help of the Zacks Stock Screener to zero in on five MedTech stocks with favorable Zacks Rank and Growth Score.
HMS Holdings Corp. (HMSY - Free Report) , with a Zacks Rank #2, provides cost containment solutions in the United States healthcare marketplace. This $2.69 billion company has a Growth Score of B. Its long-term historical growth rate was 7%. The company’s long-term expected earnings growth rate is pegged at 11%.
West Pharmaceutical Services, Inc. (WST - Free Report) currently has a Zacks Rank of 2 and a Growth Score of B. The company manufactures and sells containment and delivery systems for injectable drugs and healthcare products in the United States, Germany, France, Other European countries, South Korea, and internationally. The company, with a market capitalization of $11.54 billion, has a five-year historical growth rate of 11.9%. It expects a long-term earnings growth rate of 14%.
LHC Group, Inc. (LHCG - Free Report) , with a Zacks Rank of 1, serves as a post-acute care partner for hospitals, physicians and families in the United States. From home health and hospice care to long-term acute care and community-based services, the company delivers high-quality, cost-effective care that helps patients manage their health at home. This $4.5 billion company has a Growth Score of A. The company has a five-year historical growth rate of 19.7%. It expects a long-term earnings growth rate of 13.9%.
Cerner Corporation (CERN - Free Report) currently has a Zacks Rank of 2 and a Growth Score of B. The company provides healthcare information technology (HCIT) solutions worldwide. The company, with a market capitalization of $22.95 billion, has a five-year historical growth rate of 10.7%. It expects a long-term earnings growth rate of 13.6%.
Omnicell, Inc. (OMCL - Free Report) , with a Zacks Rank #2 and a Growth Score of A, develops and markets end-to-end automation solutions for the medication-use process. The company, with a market capitalization of $3.49 billion, has a five-year historical growth rate of 13.7%. It expects a long-term earnings growth rate of 12.5%.
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