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3 MedTech Growth Stocks With Solid Prospects for 2021

The MedTech space has not been left unscathed by the coronavirus rampage that battered the economy for the most part of the year.  

MedTech companies however delivered sturdy performance during the recently concluded earnings season, raising investors’ hopes.

Meanwhile, the ongoing saga surrounding the proposed additional COVID-19 relief package spurs uncertainty. Many economists are of the view that approval of this additional stimulus is only possible if there is a hindrance in vaccine rollout, which would drag down the economy again in 2021.

MedTech 2020 Snapshot

During the last earnings season, the MedTech space put up a mixed performance. Amid the volatile market situation, MedTech companies, which are into diagnostics business, put up a stellar show.

Per a report by CNBC, daily new infections in the country (as a seven-day average) are at an all-time high and quickly approaching 200,000. In this scenario, companies in the diagnostic business are poised to benefit from the surging demand for testing. In fact, this business has actually benefited from the surging demand for pandemic-led testing. Renowned healthcare diagnostics player, Laboratory Corporation of America Holdings LH or LabCorp, registered significant uptick in its Diagnostics segment revenues in the third quarter of 2020. Its organic volume improvements primarily resulted from growing demand for COVID-19 testing. Its continuous fight against the pandemic is also impressive. Year to date, this stock has risen 19.6% compared with the industry’s 14.8% rise.

However, companies, which rely mainly on elective procedures for their revenues, have suffered huge losses. One such notable example is renowned cardiovascular player Cardiovascular Systems, Inc. CSII, which continued to put up dismal performances due to the pandemic-led deferral of procedures. Year to date, this stock has lost 24.4% against the industry’s 1.3% rise.

MedTech Growth Stocks to Buy Ahead of 2021

Overall, MedTech stocks have adjusted their business models over the past few months and in fact have already started to recover and approach pre-COVID levels. Although it will take some time for the companies to reach the pre-COVID levels of business, it is heartening to witness the steady progress.

As we enter 2021, investors can now choose to invest in stocks, which held their ground amid choppy market conditions and have strong growth potential.

3 Stocks to Buy

We have selected stocks with a Growth Score of A or B. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our first pick is renowned provider of comprehensive home care services, Addus HomeCare Corporation ADUS. The company presently carries a Zacks Rank #2 and has a Growth Score of A. It recently closed its acquisition of Queen City Hospice, LLC, and its affiliate Miracle City Hospice, LLC, thus strengthening its presence in its current markets. Its inorganic and organic growth opportunities along with solid third-quarter results inspire optimism in the stock.

Its projected earnings per share (EPS) growth stands at a solid 25.8% versus the industry’s projection of 19.1%. Further, its sales-to-asset ratio stands at an impressive 1.2 compared with the industry’s 0.8. The company projects 20.9% earnings growth for the next year. Year to date, the stock has gained 7.3% compared with the sector’s 4.5% rise.

Our next pick is Fulgent Genetics, Inc. FLGT, a well-known technology company providing comprehensive testing solutions. The company presently sports a Zacks Rank #1 and has a Growth Score of B. The company is riding on strong demand for its COVID-19 tests. Also, the company posted solid third-quarter results amid the pandemic-led challenging business climate.

Its projected EPS growth stands at a stupendously high level compared with the industry’s projection of 3.6%. Further, its return on equity (ROE) stands at an impressive 43.8% against the industry’s negative returns. The company projects 31% earnings growth for the next year. Year to date, the stock has gained 272.2% compared with the industry’s 26.3% rise.

Our final pick is renowned diagnostics player, Hologic, Inc. HOLX. This Zacks Rank #1 company with a Growth Score of B registered growth in the core molecular diagnostics sub-segment in the fourth quarter of fiscal 2020. The company, in October, announced the amendment of the FDA’s Emergency Use Authorization (EUA) that was initially received for its Aptima SARS-CoV-2 assay. It had received the FDA’s EUA for its Panther Fusion SARS-CoV-2 assay in September.

Its projected EPS growth rate currently stands at 68.4% compared with the industry’s 12.2%. Further, its ROE stands at 45.2% against the industry’s negative return. The company projects 68.3% earnings growth for 2021. Year to date, the stock has gained 37.6% compared with the industry’s 19.2% rise.

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Hologic, Inc. (HOLX): Free Stock Analysis Report
 
Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
 
Addus HomeCare Corporation (ADUS): Free Stock Analysis Report
 
Cardiovascular Systems, Inc. (CSII): Free Stock Analysis Report
 
Fulgent Genetics, Inc. (FLGT): Free Stock Analysis Report
 
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