Amid fears of the economy heading into a recession by the end of the year, investors are running low on confidence. However, although the market is currently volatile, investors could keep a lookout for medical growth stocks Medtronic plc (MDT), Smith & Nephew plc (SNN), and Haemonetics Corporation (HAE).
The medical device sector manufactures a wide range of items the healthcare industry needs. Moreover, factors such as a rapidly aging population and a rise in chronic diseases are expected to drive the growth of the medical devices industry.
Medical equipment required to track, monitor, and diagnose various diseases is indispensable to the healthcare sector.
Therefore, the healthcare sector benefits from inelastic demand for its services. According to Statista, the revenue of the medical devices segment is expected to grow at a CAGR of 4.7% to reach $206.60 billion by 2023.
Moreover, investors’ interest in growth stocks is evident from the Vanguard Growth ETF’s (VUG) 32.8% returns over the past six months.
Given these factors, investors could consider the featured medical stocks. Let’s take a closer look at their fundamentals.
Medtronic plc (MDT)
Headquartered in Dublin, Ireland, MDT develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. It operates through four segments, Cardiovascular Portfolio; Medical Surgical Portfolio; Neuroscience Portfolio; and Diabetes Operating Unit.
MDT’s EBITDA grew at a CAGR of 2.3% over the past three years. Its EBIT grew at a CAGR of 3.2% over the past three years. Moreover, its revenue grew at a CAGR of 2.6% over the past three years.
In terms of forward non-GAAP P/E, MDT’s 17.45x is 15.9% lower than the 20.76x industry average. Its 16.72x forward EV/EBIT is 2.1% lower than the 17.07x industry average. Likewise, its 3.64x forward Price/Sales is 15.2% lower than the 4.29x industry average.
MDT’s non-GAAP net sales for the fiscal fourth quarter ended April 28, 2023, increased 5.6% year-over-year to $8.54 billion. Its non-GAAP operating profit increased 4.6% year-over-year to $2.51 billion. In addition, its non-GAAP EPS came in at $1.57, representing a 3.3% increase over the prior-year quarter.
Analysts expect MDT’s revenue for the quarter ending July 31, 2023, to increase 2.6% year-over-year to $7.56 billion. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 13.4% to close the last trading session at $88.10.
MDT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Medical - Devices & Equipment industry, it is ranked #7 out of 135 stocks. It has a B grade for Growth, Value, and Stability.
To see the additional ratings of MDT for Momentum, Sentiment, and Quality, click here.
Smith & Nephew plc (SNN)
Headquartered in Watford, the United Kingdom, SNN, with its subsidiaries, develops, manufactures, markets, and sells medical devices and services in the United Kingdom and internationally. It operates through three segments: Orthopaedics; Sports Medicine & ENT; and Advanced Wound Management.
SNN’s revenue grew at a CAGR of 0.5% over the past three years. SNN’s forward EBITDA grew at a CAGR of 4.8%. Moreover, its total assets grew at a CAGR of 2.3% over the past three years.
In terms of forward EV/Sales, SNN’s 3.02x is 18.6% lower than the 3.71x industry average. Its 11.65x forward EV/EBITDA is 14.2% lower than the 13.58x industry average. Likewise, its 2.54x forward Price/Sales is 40.9% lower than the 4.29x industry average.
SNN’s total revenues for the fiscal first quarter ended April 1, 2023, increased 3.8% year-over-year to $1.36 billion.
Analysts expect SNN’s revenue for the quarter ended March 31, 2023, to increase 3.8% year-over-year to $1.36 billion. Over the past nine months, the stock has gained 38.9% to close the last trading session at $32.25.
SNN’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #8 in the same industry. The stock has a B grade for Growth, Value, Stability, and Sentiment. For additional ratings of SNN for Momentum and Quality, click here.
Haemonetics Corporation (HAE)
HAE is headquartered in Boston, Massachusetts. The company offers automated plasma collection systems, donor management software, including NexSys PCS and PCS2 plasmapheresis equipment and related disposables and intravenous solutions.
HAE’s revenue grew at a CAGR of 5.7%, and EPS grew at a CAGR of 14.8% over the past three years. HAE’s total assets grew at a CAGR of 15.2% over the past three years.
In terms of forward non-GAAP PEG, HAE’s 1.73x is 22.7% lower than the 2.23x industry average. Likewise, its 3.47x forward Price/Sales is 19.3% lower than the 4.29x industry average.
HAE’s adjusted gross profit increased 11% year-over-year to $157.58 million for the quarter that ended April 1, 2023. The company’s adjusted operating income increased 15.8% year-over-year to $53.94 million. Its adjusted net income increased 17% year-over-year to $39.23 million. Its adjusted net EPS came in at $0.77, representing an 18.5% increase year-over-year.
HAE’s EPS and revenue for the quarter ended June 30, 2023, are expected to increase 25.6% and 12% year-over-year to $0.73 and $292.74 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 30.6% to close the last trading session at $85.14.
HAE’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #6 in the Medical - Devices & Equipment industry. The stock has a B grade for Growth and Quality. Click here to see the additional ratings of HAE for Value, Momentum, Stability, and Sentiment.
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MDT shares were trading at $87.06 per share on Monday morning, down $1.04 (-1.18%). Year-to-date, MDT has gained 13.87%, versus a 16.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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