The US healthcare industry is massive and is evolving with breakthrough developments and technological advancements. Moreover, the industry remains resilient in the face of macroeconomic headwinds, thanks to inelastic demand for products and services.
Given this backdrop, buying stable healthcare stocks Amgen Inc. (AMGN) and Otsuka Holdings Co., Ltd. (OTSKY) could be wise. These stocks are A or B rated in our POWR Ratings system.
While sales of COVID-19 tests are waning, manufacturers and providers are rolling out other types of at-home tests, including those for sexually transmitted diseases which are now considered an “out-of-control” situation in the US.
According to Precedence Research, the global home diagnostics market is expected to reach $8.15 billion by 2030. The do-it-yourself healthcare market is booming.
On the other hand, the pandemic has accelerated the shift towards digitalization, telemedicine, and personalized medicine, all of which are expected to drive growth in the industry. The global personalized medicine market is projected to grow at a CAGR of 10.9% to reach $540.12 billion by 2028. The global healthcare market is expected to reach $665.37 billion by 2028.
Also, demand is on the rise for services from the small business healthcare segment, which includes physician offices, dental labs, vision clinics, and other providers that serve local communities. Despite a continuing industry trend toward consolidation into large groups and hospitals, small healthcare practices are expected to increase this year.
According to IBISWorld, the number of companies specializing in primary care is expected to rise steadily at a yearly rate of 1.6%, reaching 152,496 businesses by 2027.
Let’s discuss the stocks mentioned above in detail:
Amgen Inc. (AMGN)
AMGN discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience areas.
AMGN’s forward non-GAAP P/E multiple of 13.61 is 32.2% lower than the industry average of 20.12. Its forward EV/EBIT multiple of 11.60 is 30.4% lower than the industry average of 16.66.
On March 7, AMGN announced a quarterly dividend of $2.13 per share of common stock, payable on June 8, 2023.
AMGN pays $8.52 annually as dividends. This translates to a yield of 3.50% at the current market price, compared to the 4-year average dividend yield of 2.90%. Its dividend payments have grown at a CAGR of 10.1% over the past three years. Also, it has paid dividends for 11 years consecutively.
During the fiscal fourth quarter that ended December 31, 2022, AMGN’s product sales increased 4.5% year-over-year to $6.55 billion. Its non-GAAP operating income increased marginally year-over-year to $3.01 billion, whereas its earnings per share came in at $3.
AMGN’s revenue is expected to come in at $6.19 billion during the fiscal first quarter that ended March 2023. Its EPS is expected to come in at $3.86 for the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 3.7% over the past month to close the last trading session at $243.46. It has a beta of 0.64.
AMGN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade in Quality and a B in Value and Stability. The stock is ranked #14 in the 381-stock Biotech industry.
Click here to see the POWR Ratings of AMGN (Growth, Momentum, and Sentiment).
Otsuka Holdings Co., Ltd. (OTSKY)
Based in Tokyo, Japan, OTSKY engages in pharmaceuticals, nutraceuticals, consumer products, and other businesses worldwide. The company develops pharmaceutical products in the fields of psychiatry, neurology, oncology, cardiovascular and renal system, digestive system, ophthalmology, diagnostics, and intravenous solutions, as well as medical devices businesses.
OTSKY’s forward EV/Sales multiple of 1.18 is 67.3% lower than the industry average of 3.60. Its forward EV/EBIT multiple of 9.97 is 40.1% lower than the industry average of 16.66.
OTSKY pays $0.37 annually as dividends. This translates to a yield of 2.28% at the current market price. The 4-year average dividend yield is 2.32%.
OTSKY’s revenue increased 16% year-over-year to ¥1.74 trillion ($12.93 billion) during the fiscal year, which ended December 31, 2022. Its gross profit increased 16.5% year-over-year to ¥1.17 trillion ($8.69 billion), while its profit for the year increased 6.4% year-over-year to ¥137.42 billion ($1.02 billion). Also, its EPS increased 6.9% year-over-year to ¥246.99.
OTSKY’s revenue is expected to rise 7.2% year-over-year to $3.15 billion during the fiscal first quarter that ended March 2023. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters.
The stock has gained 10.4% over the past month to close the last trading session at $16.41. It has a beta of 0.31.
OTSKY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
OTSKY also has an A grade for Growth, Value, and Stability and a B for Quality. It is ranked #2 in the same industry.
To access additional ratings for OTSKY’s Momentum and Sentiment, click here.
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AMGN shares fell $0.77 (-0.32%) in premarket trading Friday. Year-to-date, AMGN has declined -6.49%, versus a 8.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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