The medical sector is poised for growth with rising healthcare demand due to an aging population and technological advancements. Moreover, institutional investors are drawn to the industry's stability and growth potential, driven by inelastic demand for its products and services.
Therefore, I think investors could consider quality medical stocks Utah Medical Products, Inc. (UTMD), FONAR Corporation (FONR), and Electromed, Inc. (ELMD). These stocks are backed by solid institutional ownership and low beta values, indicating stability in uncertain markets.
The medical sector is experiencing a boost due to the growing adoption of data analytics and companies' rising emphasis on preventive care. Additionally, the expansion of the digital healthcare market is being facilitated by the increasing penetration of smartphones, enhanced internet connectivity, and advancements in healthcare IT infrastructure.
The global digital healthcare market is anticipated to grow at a CAGR of 23.7% until 2030, reaching a whopping $1.30 trillion.
Furthermore, advancements in healthcare research have also led to a shift towards greater reliance on machines, reducing the need for extensive staff. Also, the industry's growth is fueled by rising demand for medical services due to increased patients with long-term conditions and the popularity of medical home services offered through internet applications.
The global medical home services market is expected to grow at a CAGR of 10.7%, generating revenues of $163.84 billion by 2033, up from $59.28 billion in 2023.
Moreover, the increasing number of surgical procedures, the higher incidence of hospital-acquired infectious diseases (HAI), and the growing emphasis on health and hygiene maintenance are anticipated to propel the disposable medical supplies market.
The US disposable medical supplies market is expected to reach $228.38 billion by 2028, growing at a CAGR of 11.5%.
Take a look at the above-mentioned stocks in detail:
Utah Medical Products, Inc. (UTMD)
UTMD is engaged in developing, manufacturing, and distributing medical devices for the healthcare industry. The company offers fetal monitoring accessories, vacuum-assisted delivery systems, and other labor and delivery tools, serving neonatal intensive care units, labor and delivery departments, women’s health centers in hospitals, etc.
UTMD exhibits notably substantial institutional ownership, with institutions holding around 72.6% of the total outstanding shares. Moreover, the total value of these institutional holdings amounts to approximately $259 million, underscoring the institutions' significant interest in the company.
UTMD’s trailing-12-month P/E multiple of 20.99 is 28.5% lower than the industry average of 29.38x. The stock’s trailing-12-month EV/EBIT of 13.40x is 38% lower than the 21.84x industry average.
On July 6, UTMD paid a quarterly dividend of $0.295 per share of common stock. The company’s annual dividend of $1.18 translates to a 1.19% yield on the prevailing prices, while its four-year average dividend yield is 1.76%.
UTMD’s net sales increased 1.6% year-over-year to $12.52 million in the first quarter that ended March 31, 2023. Its gross profit rose 4.1% from the year-ago quarter to $7.84 million. The company’s net income and EPS increased 19.2% and 20.2% from the prior-year quarter to $4.21 million and $1.16.
UTMD’s revenue and EPS have increased at CAGRs of 3.7% and 6.2% over the past three years, respectively.
Over the past year, the stock has gained 21.9% to close the last trading session at $98.38. It has gained 4.5% over the past month. The stock’s 60-month beta is 0.21.
UTMD’s POWR Ratings reflect solid prospects. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Stability and Sentiment. Within the 138-stock Medical – Devices & Equipment industry, it is ranked #3.
Click here to see UTMD’s ratings for Growth, Value, and Momentum.
FONAR Corporation (FONR)
FONR engages in the research, development, production, and marketing of Magnetic Resonance Imaging (MRI) scanners to detect and diagnose human diseases. It operates through the Medical Equipment; Physician Management; and Diagnostic Services segments.
FONR has a significant level of institutional ownership, with institutions holding approximately 47.7% of the total outstanding shares. The total value of the institutional holdings amounts to $53 million, reflecting a substantial financial commitment from these investors.
In terms of trailing-12-month P/E, FONR is trading at 11.23x, 61.8% lower than the industry average of 29.38x. The stock’s trailing-12-month EV/EBIT of 5.60x is 74.3% lower than the 21.84x industry average.
FONR’s net revenues increased 3.5% year-over-year to $25.42 million in the fiscal third quarter that ended on March 31, 2023, while its income from operations amounted to $4.17 million. Its net income and EPS came in at $4.48 million and $0.55 per share, reflecting increases of 37.5% and 71.9% from the prior-year quarter, respectively.
FONR’s revenue and total assets have grown at CAGRs of 3.8% and 5.2% over the past three years.
Shares of FONR have gained 8.2% over the past three months to close the last trading session at $16.91. It has a 24-month beta of 0.51.
FONR’s promising outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B for Growth, Value, Sentiment, and Quality. Also, within the same industry, it is ranked first.
Access additional FONR’s rating for Momentum here.
Electromed, Inc. (ELMD)
ELMD develops, manufactures, and markets innovative High-Frequency Chest Wall Oscillation (HFCWO) airway clearance products used in pulmonary care for patients of all ages. It offers SmartVest Airway Clearance System, including SmartVest SQL and SmartVest Connect wireless technology and related products, to patients with compromised pulmonary function.
ELMD has institutional ownership of approximately 26.5%, with the total value of institutional holdings amounting to $25 million.
ELMD’s forward EV/S and P/S multiples of 1.80 and 1.97 are 52.1% and 53.1% lower than the industry averages of 3.75x and 4.19x, respectively.
During the fiscal third quarter that ended March 31, 2023, ELMD’s net revenues increased 19% year-over-year to $12.07 million. Its gross profit rose 16.9% from the prior-year quarter to $9.06 million, while its operating income improved 38.6% from the year-ago value to $1.19 million.
Moreover, the company’s net income amounted to $1.08 million and $0.12 per share, representing 66.7% and 71.4% year-over-year increases from the same quarter last year.
The consensus EPS estimate of $0.13 for the to-be-announced quarter that ended June 30, 2023, represents a 225% improvement year-over-year. The consensus revenue estimate of $12.80 million for the same quarter indicates a 13.6% increase from the previous-year quarter. In addition, the company surpassed the consensus revenue estimates in three of its trailing four quarters, which is remarkable.
ELMD’s revenue and total assets have increased at CAGR of 10.2% and 9.1% over the past three and five years, respectively.
Shares of ELMD have gained 25.9% over the past year and 10.5% over the past three months to close the last trading session at $11.17. Its 24-month beta is 0.40.
ELMD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
ELMD is also rated an A in Sentiment and a B in Growth, Value, and Stability. The stock is ranked #2 in the same industry.
In addition to the POWR Ratings highlighted above, one can access ELMD’s additional grades for Momentum and Quality here.
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UTMD shares were trading at $98.30 per share on Wednesday morning, down $0.08 (-0.08%). Year-to-date, UTMD has declined -1.60%, versus a 20.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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