The rapid utilization of advanced technologies and rising demand for personalized healthcare have significantly bolstered the healthcare industry. Moreover, the increasing geriatric population and chronic diseases have also contributed to the demand for healthcare.
Therefore, investors could consider buying highly profitable healthcare stocks IDEXX Laboratories, Inc. (IDXX), Veeva Systems Inc. (VEEV), and Chemed Corporation (CHE) for consistent returns.
The healthcare industry is characterized by a steady demand for medications and treatments, making it non-cyclical. Factors such as the rise in chronic diseases, an aging population, and efforts to enhance drug affordability worldwide are driving the need for effective drugs and therapies.
The increased emphasis on personalized and precision medicine to enhance treatment outcomes boosts demand for tailored treatments. The care services market is growing due to a growing elderly population, the rise in recurring and debilitating diseases, government initiatives, advancements in medical science, shifts in consumer preferences, and the need for assistance amongst patients with day-to-day activities.
Additionally, the adoption of technology-based care services such as teleconsultation apps, remote patient monitoring, and AI-driven devices are also driving market growth. The U.S. care services market is expected to reach $748.50 billion by 2030, growing at a 5.8% CAGR.
Meanwhile, the medical device market is witnessing growth due to factors such as the increased adoption of minimally invasive procedures, the higher prevalence of sports and road accidents, and expanded market reach.
Innovation in the market is driven by technological advancements such as smart devices, AI in diagnostics, wearable medical tech, cybersecurity, and telehealth solutions, enhancing patient outcomes and accessibility. The U.S. medical device manufacturers market is projected to hit $360.10 billion by 2030, exhibiting a CAGR of 5.8%.
Considering these factors, let’s examine the fundamentals of the three healthcare stocks.
IDEXX Laboratories, Inc. (IDXX)
IDXX develops, manufactures, and distributes products internationally for the companion animal veterinary, livestock and poultry, dairy, and water testing markets. The company operates through three segments: Companion Animal Group, Water Quality Products, and Livestock, Poultry and Dairy.
On June 4, 2024, IDXX announced the launch of the Catalyst Pancreatic Lipase Test, a single-slide solution for dogs and cats suspected of pancreatitis. By utilizing the Catalyst analyzers, the tests are streamlined for quicker diagnosis and improved patient results.
The test will initially launch in the U.S. and Canada this September, with plans for a global rollout to over 70,000 Catalyst installed bases starting in the fourth quarter of 2024.
IDXX’s trailing-12-month asset turnover ratio of 1.21x is 199.6% higher than the industry average of 0.40x. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 29.95% and 19.68% are considerably higher than the industry averages of 1.87% and 1.12%, respectively.
IDXX’s revenue for the fiscal first quarter that ended March 31, 2024, increased 7.1% year-over-year to $964.10 million. Its free cash flow stood at $168.31 million, up 16.6% from the prior year quarter. In addition, its net income attributable to stockholders rose 10.1% from the year-ago quarter to $235.58 million. Also, its earnings per share grew 10.2% year-over-year to $2.81.
Analysts expect IDXX’s revenue and EPS for the quarter that ended June 30, 2024, to increase 6.3% and 8.2% year-over-year to $1 billion and $2.89, respectively. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past nine months, the stock has gained 11.5%, closing the last trading session at $487.20.
IDXX’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
IDXX has an A grade for Quality and a B for Sentiment. It is ranked #24 out of 133 stocks in the Medical - Devices & Equipment industry. Click here to see IDXX’s Growth, Value, Momentum, and Stability ratings.
Veeva Systems Inc. (VEEV)
VEEV provides cloud-based software for the life sciences industry. It offers Veeva Commercial Cloud, Veeva Vault PromoMats, Veeva Vault Medical, Veeva Crossix, Veeva OpenData, Veeva Link, and Veeva Compass for the United States.
On June 19, 2024, VEEV partnered with Vita Global Sciences to modernize its clinical data management processes and improve collaboration with key trial stakeholders. With Veeva Vault EDC, the CRO established a foundation for study efficiency and faster study builds.
On June 6, 2024, VEEV announced that Hangzhou Tigermed Consulting Co., Ltd. selected Veeva Vault EDC as its technology foundation for modern electronic data capture (EDC). With Vault EDC, Tigermed simplified complex data management for faster study builds and mid-study amendments with zero downtime.
VEEV’s trailing-12-month asset turnover ratio of 0.44x is 10% higher than the industry average of 0.40x. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 21.22% and 42.54% are considerably higher than the industry averages of 1.87% and 1.12%, respectively.
For the first quarter that ended April 30, 2024, VEEV’s total revenues and non-GAAP gross profit stood at $650.35 million and $491.78 million, up 23.6% and 31.1% year-over-year, respectively. For the same quarter, its non-GAAP net income and net income per share increased 66.9% and 64.8% from the year-ago quarter to $246.95 million and $1.50, respectively.
Street expects VEEV’s EPS and revenue for the quarter ending July 31, 2024, to increase 26.8% and 13.2% year-over-year to $1.53 and $668.07 million, respectively. The company surpassed consensus EPS and revenue estimates in each of the trailing four quarters. VEEV has declined 4.9% year-to-date, closing the last trading session at $183.01.
VEEV’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, equating to Buy in our proprietary rating system.
It has an A grade for Growth and Quality and a B for Sentiment. It is ranked #17 out of 60 stocks in the Medical - Services industry. Get VEEV’s Value, Momentum, and Stability ratings here.
Chemed Corporation (CHE)
CHE provides hospice and palliative care services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers in the U.S. The company operates in VITAS and Roto-Rooter segments.
On April 17, 2024, CHE’s VITAS Healthcare Corporation announced the completion of the purchase of all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc. d/b/a/ Covenant Care for $85 million. The transaction was structured as an asset purchase.
CHE’s trailing-12-month asset turnover ratio of 1.45x is 259.9% higher than the industry average of 0.40x. Likewise, its trailing-12-month EBITDA margin and levered FCF margin of 17.43% and 10.99% are 199.1% and 878% higher than the industry averages of 5.83% and 1.12%, respectively.
CHE’s service revenues and sales for the fiscal first quarter that ended March 31, 2024, amounted to $589.23 million, up 5.2% year-over-year. Its adjusted EBITDA rose 14.5% from the prior-year quarter to $114.62 million. Moreover, its adjusted net income stood at $79.83 million and $5.20 per share, up 23.3% and 21.5% from the prior-year quarter, respectively.
For the quarter that ended June 30, 2024, CHE’s revenue and EPS are expected to increase 8.2% and 18.8% year-over-year to $599.20 million and $5.59, respectively. The stock has gained 3.9% over the past nine months to close the last trading session at $542.58.
CHE’s POWR Ratings reflect its robust prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
CHE has an A grade for Quality and a B for Stability and Sentiment. Within the Medical - Services industry, it is ranked #10. Click here for the additional POWR Ratings of CHE (Growth, Value, and Momentum).
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IDXX shares were trading at $484.08 per share on Monday morning, down $3.12 (-0.64%). Year-to-date, IDXX has declined -12.79%, versus a 15.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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