Market watchers are hoping for an economic turnaround in 2021, given the latest stimulus package signed by the new President. The latest financial stimulus package of $1.9 trillion, known as the American Rescue Plan, is expected to provide some relief to the pandemic-battered U.S. economy.
Although the direct impact of the American Rescue Plan on the MedTech sector is still unclear, the package is aimed at allowing more Americans to take advantage of new federal subsidies to reduce health insurance premiums under the new relief package. Further, the rescue package will also provide significant additional funding for COVID-19 vaccines and therapeutics.
Another package of approximately $3 trillion, which focuses on infrastructure and jobs, is currently under consideration, reports
The Washington Post
. Although no announcement has been made regarding this, if implemented, it is expected to provide a significant boost to the overall economy.
MedTech So Far in 2021
With the emergence of new virus strains since the last two months of 2020 and with rising coronavirus cases, a number of subsectors within MedTech have put up stellar performances. However, just like 2020, a few non-COVID and non-elective subsectors are unable to match up to that level, thus leading the overall MedTech sector to present a mixed show.
A notable example of a company whose sales improved significantly due to the surge in COVID-19 infections is renowned healthcare diagnostics player,
Laboratory Corporation of America Holdings
LH
or LabCorp. The company has been maintaining its stellar performance since the initial phases of the pandemic, riding on its robust Diagnostics business. Diagnostics revenues have been significantly high on the back of organic volume improvements resulting from growing demand for COVID-19 testing. Over the past six months, this stock has risen 36.1% compared with the
industry
’s 18.5% rise.
On the other hand, companies, which rely mainly on elective procedures for their revenues, have suffered huge losses. One such example is renowned cardiovascular player
Cardiovascular Systems, Inc.
CSII
, which continued to put up dismal performances due to the pandemic-led deferral of procedures. Over the past six months, the stock has gained 5.6% compared with the
industry
’s 9.6% rise.
What’s Working for MedTech?
It has been widely seen that during the pandemic months, MedTech stocks have adjusted their business models and in fact have already started to recover and approach pre-COVID-19 levels. Although it will take some time for the companies to reach the pre-COVID-19 levels of business, it is heartening to witness the steady progress.
As 2021 progresses, investors can choose to invest in stocks, which have held their ground amid choppy market conditions and have strong growth potential.
5 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. All the stocks discussed here carry a Zacks Rank #2. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Our first pick is the renowned provider of a diversified line of healthcare products,
Abbott Laboratories
ABT
. The company, with a Growth Score of B, has been registering improvements in testing and procedure volumes across its hospital-based businesses over the past few months. Abbott has launched a slew of products over the past few months, which boosted its Molecular & Rapid Diagnostics businesses.
Its projected earnings per share (EPS) growth stands at a solid 38.9% compared with the industry’s projection of 21.4%. Further, its Return on Equity (ROE) stands at an impressive 20.8% against the industry’s negative returns. The company projects 14.1% earnings growth for the next five years. Over the past six months, the stock has gained 13% compared with the industry’s 9.6% rise.
The next stock that investors can scoop up is key diagnostics player,
Hologic, Inc.
HOLX
. The company, having a Growth Score of B, has been registering significant improvements in its Diagnostic revenues over the past few months, led by improvements in Molecular Diagnostics. Also, robust demand for the company’s COVID-related products buoys optimism on the stock.
Its projected EPS growth stands at an impressive 121.5% compared with the industry’s projection of 27.9%. Further, its ROE stands at an impressive 63.5% against the industry’s negative returns. The company projects 15.4% earnings growth for the next five years. Over the past six months, the stock has gained 9.4% compared with the
industry
’s 0.9% rise.
Renowned global medical device provider
Hill-Rom Holdings, Inc.
HRC
is our next choice. The company, having a Growth Score of B, has been registering a sharp recovery in emerging market sales over the past few months. During the first quarter of fiscal 2021, the company saw strength in demand for bed rentals and several Front Line Care products along with sequential recovery in the Patient Support Systems arm.
Its current cash flow growth stands at a solid 21.5% against the industry’s negative growth. Further, its ROE stands at 23.8% against the industry’s negative returns. The company projects 7.3% earnings growth for the next five years. Over the past six months, the stock has gained 29.1% compared with the industry’s 9.6% rise.
Our next pick is renowned animal health player,
IDEXX Laboratories, Inc.
IDXX
. The company, with a Growth Score of A, has been showing strong growth within its Companion Animal Group (CAG) and Livestock, Poultry and Dairy businesses over the past few months. Sturdy rise in CAG Diagnostics’ recurring revenues are also encouraging.
Its current cash flow growth stands at 31.4% compared with the industry’s 0.9%. Further, its ROE ratio stands at an impressive 159.9% against the industry’s negative return. The company projects 15.8% earnings growth for the next five years. Over the past six months, the stock has gained 22.4% compared with the industry’s 0.9% rise.
Our final pick is
LeMaitre Vascular, Inc.
LMAT
, a well-known global provider of medical devices and human tissue cryopreservation services. The company, having a growth score of B, posted solid fourth-quarter 2020 results. Its growth across all the major geographies along with robust sales of biologic grafts, valvulotomes and embolectomy catheters amid the pandemic-led business challenges is impressive.
Its current cash flow growth stands at 26.8% compared with the industry’s negative growth. Further, its ROE ratio stands at 13.4% against the industry’s negative return. The company projects 10% earnings growth for the next five years. Over the past six months, the stock has gained 41.4% compared with the industry’s 9.6% rise.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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