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5 MedTech Stocks That Have Outperformed the Industry in 2020

The U.S. economy, through majority of 2020, has been bearing the brunt of the coronavirus pandemic. From the middle of the year, it started showing strong signs of a rebound across many sectors on gradual lifting of restrictions. Yet again, since the resurgence of COVID-19 cases in November, several regions in the United States imposed ‘Limited’ and ‘Regional’ stay-at-home restrictions. The situation is so unclear at present that the strong chances of early approval of vaccines are unable to put a brake on the ongoing market uproar.

That said, MedTech is the sector where companies are gradually adapting to changing customer requirements, which is aiding in the overall rebound of the macroeconomic situation.

Meanwhile, per latest updates, the Congress is gearing up to approve another coronavirus relief package and a government funding bill this week. The bill, which is valued at $900 billion, is inching toward a consensus by the U.S. Congress and is keeping market sentiments upbeat. However, the extent of benefit the MedTech sector will derive from this bill is not clear yet.

The bill, if passed, was expected to provide $10 billion for testing and contact tracing along with $6 billion into vaccine distribution.

MedTech 2020 Snapshot

Over the past few months, the MedTech sector has witnessed a very tumultuous phase. On one hand, few of the U.S. MedTech players put up stellar performances as a result of the surging coronavirus infections. A notable example in this respect is renowned diversified health care products provider, Abbott Laboratories ABT has been seeing improvement in both testing and procedure volumes across its hospital-based businesses. Year to date, this stock has risen 23.6% compared with the industry’s 2.4% rise.

Meanwhile, MedTech players, which are majorly engaged in elective procedures, suffered a severe blow due to the non-diversified nature of their businesses. One such notable example is renowned cardiovascular player Cardiovascular Systems, Inc. CSII, which continued to put up a dismal performance during the third quarter due to the pandemic-led deferral of procedures. Year to date, this stock has lost 18% against the industry’s 2.4% rise.

Best MedTech Stocks to Buy Now

Amid the choppy market conditions, it will be prudent for investors to take note of those companies which held their ground despite the market meltdown. Such stocks have a great long-term growth potential and might turn out to be good investment choices. These companies, which belong to various subsectors within the broader MedTech sector, are expected to continue with their robust performances amid the pandemic-led market mayhem.

5 Stocks to Buy

Here we have picked five stocks from the MedTech space which performed quite impressively despite the pandemic-led market meltdown, primarily due to the nature of their business. These stocks held their ground during the third quarter and have become extremely attractive picks now.

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 a global manufacturer of integrated containment and delivery systems for injectable drugs and healthcare products — West Pharmaceutical Services, Inc. WST. The Zacks Rank #2 company, with a Growth Score of B, received the FDA’s 510(k) clearance for its Vial2Bag Advanced 20mm Admixture Device and has subsequently launched it. The device enables reconstitution and transfer of a drug between a vial and an IV bag.

Its earnings per share (EPS) growth projection stands at a solid 40.2% versus the industry’s 6.8%. Further, its Return on Equity (ROE) ratio stands at an impressive 20.1% compared with the industry’s 13.1%. The company projects 20.5% earnings growth for the next five years. Year to date, the stock has gained 78% compared with the industry’s 14.8% rise.

Our next pick is renowned animal health player, IDEXX Laboratories, Inc. IDXX. The Zacks Rank 2 company, with a Growth Score of B, has been showing strong growth within its Companion Animal Group (CAG) business. Sturdy rise in CAG Diagnostics’ recurring revenues are also encouraging.

Its projected EPS growth stands at 25.3% versus the industry’s projection of 12.2%. Further, its ROE ratio stands at an impressive 198.9% against the industry’s negative return. The company projects 15.8% earnings growth for the next five years. Year to date, the stock has gained 79.1% compared with the industry’s 20.3% rise.

Our next pick is Thermo Fisher Scientific Inc. TMO, a key scientific instrument maker and renowned name in serving science. This Zacks Rank #2 company, with a Growth Score of B, launched the Amplitude Solution during the third quarter to automate high-throughput PCR-based testing. It also undertook significant capacity expansion for viral transport media production in Europe and introduced two COVID-19 antibody tests in the United States and Europe.

Its projected EPS growth stands at 50.6% versus the industry’s 12.2%. Further, its ROE ratio is at 21.4% against the industry’s negative return. The company projects 18% earnings growth for the next five years. Year to date, the stock has gained 40.9% compared with the industry’s 20.3% rise.

Next we pick renowned diagnostics player, Hologic, Inc. HOLX. This Zacks Rank #1 company has a Growth Score of B and registered growth in the core molecular diagnostics sub-segment in the fourth quarter of fiscal 2020. It has received the FDA’s Emergency Use Authorization for its Aptima SARS-CoV-2 assay and Panther Fusion SARS-CoV-2 assay.

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 17.4% earnings growth for the next five years. Year to date, the stock has gained 41% compared with the industry’s 20.3% rise.

Our final pick is renowned designer, manufacturer and distributor of medical devices and cloud-based software solutions to manage respiratory disorders, ResMed Inc. RMD. This Zacks Rank #2 company, with a Growth Score of B, has been gaining from the reopening of sleep labs and physician practices across many geographies and robust adoption of digital health solutions.

Its historical EPS growth currently stands at 14.3% versus the industry’s 8.6%. Further, its ROE of 30.6% compares favorably with the industry’s negative return. The company projects 14.5% earnings growth for the next five years. Year to date, this stock has risen 35.8% compared with the industry’s 2.4% rise.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

Start Your Access to the New Zacks Top 10 Stocks >>


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Hologic, Inc. (HOLX): Free Stock Analysis Report
 
ResMed Inc. (RMD): Free Stock Analysis Report
 
Abbott Laboratories (ABT): Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO): Free Stock Analysis Report
 
West Pharmaceutical Services, Inc. (WST): Free Stock Analysis Report
 
IDEXX Laboratories, Inc. (IDXX): Free Stock Analysis Report
 
Cardiovascular Systems, Inc. (CSII): Free Stock Analysis Report
 
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