Top Healthcare Stocks

AZTA, NBIX, and SGFY lead for value, growth, and momentum, respectively

Older woman sitting and speaking with male doctor

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Healthcare companies have outperformed in the past year, representing a potential defensive play against inflation and recessionary trends. Shares of top-performing companies doubled in that period, including payments firm Signify Health Inc., rapid test manufacturer QuidelOrtho Corp., and medical technology company Masimo Corp.

Healthcare stocks—represented by the Health Care Select Sector SPDR ETF (XLV), an exchange-traded fund (ETF)—rose 3% over the past year, compared with a 13% decline for the Russell 1000. All data are as of Jan. 19, 2022.

Here are the top three healthcare stocks in each category displaying the best value, fastest growth, and most momentum.

Best Value Healthcare Stocks

These are the healthcare stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated.

Best Value Healthcare Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
Azenta Inc. (AZTA) 56.56 3.9 2.0
QuidelOrtho Corp. (QDEL) 86.28 5.7 4.6
Moderna Inc. (MRNA) 190.38 73.1 6.9

Source: YCharts

  • Azenta Inc: This is a life sciences company providing sample and genomic services including drug development, sample and material storage, and clinical trial management. Its customers include pharmaceutical, biotechnology, and life sciences research companies.
  • QuidelOrtho Corp: The company (formerly Quidel Corp.) manufactures and markets rapid diagnostic tests for use in physicians' offices, hospitals, laboratories, and over-the-counter settings, among others. In December, the company announced that it would form a venture between its subsidiary Ortho Clinical Diagnostics Trading (China) Co. and Shanghai Medconn Biotechnology Co. to develop and manufacture assays, which are analytical tests, in China.
  • Moderna Inc.: It's a biotechnology company that develops medicines based on messenger ribonucleic acid (mRNA). It finalized on Dec. 21 a 10-year partnership with the U.K. government to establish a research, development, and manufacturing facility, expected to be open and running by 2025.

Fastest-Growing Healthcare Stocks

These are the top healthcare stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest-Growing Healthcare Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Neurocrine Biosciences Inc. (NBIX) 109.97 10.5 200.0 31.1
McKesson Corp. (MCK) 378.72 53.7 275.4 5.4
Masimo Corp. (MASI) 163.00 8.6 -30.0 78.7

Source: YCharts; Pfizer Inc.

  • Neurocrine Biosciences Inc.: This is a pharmaceutical company that develops and markets products for psychiatric, endocrine, and neurologic disorders.
  • McKesson Corp.: The global healthcare company provides products, distribution, and services to a broad range of customers including retail pharmacies, specialty practices, surgery centers, physicians' offices, healthcare providers, and nursing homes. The company's latest quarterly dividend of 54 cents is payable Jan. 3, 2023, to shareholders as of Dec. 1, 2022.
  • Masimo Corp: This medical technology company produces monitoring technologies, including pulse oximetry devices, sensors, patient monitors, automation solutions, and other related products. Even though net income dropped by over a third last quarter, revenue surged by 79%, driven by better-than-expected results in Masimo's consumer non-healthcare segment.

Healthcare Stocks With the Most Momentum

These are the healthcare stocks that had the highest total return over the past 12 months.

Healthcare Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Signify Health Inc. (SGFY) 28.83 6.8 135.9
Sarepta Therapeutics Inc. (SRPT) 127.80 11.2 102.4
Alnylam Pharmaceuticals Inc. (ALNY) 228.56 28.1 64.9
Russell 1000 N/A N/A -13.0
Health Care Select Sector SPDR ETF (XLV) N/A N/A 2.8

Source: YCharts

  • Signify Health Inc: The company offers healthcare payment programs to governments, employers, health systems, health plans, and physicians that cover millions of people. Its major customers include the U.S. government's Medicare program. In early September, Signify announced that it would be acquired by CVS Health for about $8 billion in cash. The transaction is expected to close in the first half of 2023.
  • Sarepta Therapeutics Inc.: This biopharmaceutical company focuses on the treatment of rare genetic diseases through the unique development of RNA-targeted therapeutics. Third-quarter earnings were released on Nov. 2. Revenue rose by 22% on a net loss that expanded over three times compared to Q3 2021.
  • Alnylam Pharmaceuticals Inc.: It's a pharmaceutical company that produces RNA-based therapeutics for genetic diseases. The company said in October that its loss doubled in the third quarter from a year earlier as revenue rose 41%.

Key Trends in Healthcare

The pandemic and technological advances have accelerated several key trends across the healthcare sector that provide potential opportunities for investors, among them telehealth and healthcare wearables.

Telehealth: Telehealth connects patients with health professionals using video calls and health apps. Such services allow people in less-served regional areas or those who can't easily travel to access medical advice in their homes or workplaces.

A survey conducted by the Bipartisan Policy Center showed that 63% of respondents had used telehealth as a preventative service, for a prescription refill, or routine visit for a chronic illness. Moreover, eight in 10 surveyed said their primary health issue was resolved and that they would likely use telehealth in the future. Investors can gain exposure to telehealth through stocks including Teladoc Health Inc. (TDOC), Doximity Inc. (DOCS), and American Well Corp. (AMWL).

Healthcare Wearables: Wearable electronic devices allow consumers or patients to wear technology that collects their personal health and fitness data. Healthcare wearables can send a user's health information in real time to a doctor or other health professional for regular monitoring. 

Some of the more popular healthcare wearable devices are smart health watches, electrocardiogram (ECG) monitors, blood pressure monitors, and biosensors. A survey conducted by Insider Intelligence found U.S. consumers' use of healthcare wearables increased to 33% from 9% in the past four years and will continue to grow as new health-tracking technologies emerge. Key stocks involved in healthcare wearables include Garmin Ltd. (GRMN), Wearable Health Solutions Inc. (WHSI), and, of course, Apple Inc. (AAPL).

Advantages of Healthcare Stocks

In the wake of the pandemic, the healthcare sector will likely get further public and private investment, helping drive innovation and profits. Moreover, an aging baby boomer population continues to underpin the space, creating additional demand for medical products and services. According to the Centers for Medicare and Medicaid Services, U.S. national healthcare expenditure is expected to reach $6.2 trillion by 2028, highlighting the sector's size.

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  2. YCharts. "Financial Data."

  3. Azenta Inc. "About Azenta Life Sciences."

  4. QuidelOrtho Corp. "QuidelOrtho and Runda Medical Form Joint Venture to Develop and Manufacture Assays for VITROS® Platform."

  5. Moderna Inc. "Moderna Finalizes Strategic Partnership with U.K. Government."

  6. Neurocrine Biosciences Inc. "About Us."

  7. McKesson Corp. "McKesson Corporation Declares Quarterly Dividend."

  8. Masimo Corp. "Masimo Reports Third Quarter 2022 Financial Results."

  9. Signify Health Inc. "CVS Health to Acquire Signify Health."

  10. Sarepta Therapeutics Inc. "Third-Quarter Earnings Results."

  11. Alnylam Pharmaceuticals Inc. "Third-Quarter Earnings Release."

  12. Insider Intelligence. "US Healthcare Industry in 2022: Analysis of the Health Sector, Healthcare Trends, and Future of Digital Health."

  13. Bipartisan Policy Center. "New Survey: Virtual Care Could Keep Low-Acuity Cases Out of Emergency Department."

  14. Insider Intelligence. "The Top Medical Monitoring and Healthcare Wearable Device Trends of 2022."

  15. Centers for Medicare and Medicaid Services. "NHE Fact Sheet."

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