The technology advances in healthcare are changing the way services are provided. Three health-tech stocks that could add value to your portfolio are McKesson (MCK), AmerisourceBergen(ABC) and Cardinal Health (CAH). Continue reading.
The U.S. Healthcare Industry is huge and evolving, with technological advances and breakthroughs. The industry is resilient to macroeconomic headwinds due to the inelastic nature of its demand.
This is why investing in healthcare would be profitable. It would be wise to consider investing in quality healthcare stocks such as McKesson Corporation, AmerisourceBergen Corporation, and Cardinal Health, Inc.
Over the last decade, technological innovations have transformed healthcare. Digital technologies are a key part of the industry this year, as it strives to improve patient care and reduce costs.
Global healthcare IT is expected to grow at a CAGR between 17.9% and 2030. This growth will be driven by a growing trend in digitalization, a rising demand for prevention care solutions, as well as increased spending.
Manufacturers and providers have begun to offer other at-home tests as sales of COVID-19 tests decline. Precedence Research estimates that the global market for home diagnostics will reach $8.15 Billion by 2030. Do-it-yourself health care is growing.
In 2026, global health expenditures are expected to be $1,700 per person, compared with $1,530 in 2021 in terms of purchasing power parity (PPP). The U.S. market for individual health insurance is also expected to grow at a CAGR between 6.1% and 2030.
Let's talk about the stocks listed above in detail.
MCK offers healthcare services both in the United States as well as internationally. It is divided into four segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions and Prescription Technology Solutions.
MCK's EV/Sales multiple of 0.20x, which is the forward estimate for MCK, is 94.6% less than the average industry value of 3.75x. The company's P/S forward multiple of 0.18 represents a 95.6% reduction compared to the industry average of 411.
MCK announced on April 27 a quarterly dividend payable on July 3 of $0.54 per common share.
MCK pays an annual dividend of $2.16 for each share, which is equivalent to a yield of 0.59% on the current stock price. Dividend payments have increased at a CAGR 8.9% in the last three years. The average yield on dividends for the company over the past four years is 0.87%.
MCK's revenue increased by 4.2% to $68.91 Billion during the fourth quarter of fiscal 2023. The adjusted earnings increased by 14% to $992 millions, and the adjusted earnings per share grew by 23.3% to $7.19.
MCK's earnings per share (EPS) are expected to rise marginally from the previous year to $5.84 in the first fiscal quarter ending June 2023. Revenue for the same period is expected to rise 2.5% over last year to $68.85 Billion. It has also exceeded consensus revenue estimates for three of the last four quarters.
MCK shares have risen 10.4% in the past 12 months to $368.56 at the close of the last trading day.
MCK's Power Ratings reflect a promising outlook. The stock is rated A in our proprietary system, which means it's a strong buy. The POWR ratings are calculated based on 118 factors. Each factor is weighted optimally.
Stocks have an A for Growth and Value, and a B for Quality and Stability. The stock is ranked third out of 75 stocks within the Medical-Services industry.
AmerisourceBergen Corporation (ABC)
ABC distributes pharmaceuticals. The company provides pharmacy management and staffing services, as well as other consulting services. It also offers supply management software for retail and institutional healthcare providers, packaging solutions for retail and institutional healthcare, clinical trial support and product post-approval and commercial support services.
ABC announced on April 25 the launch of the Cell and Gene Therapy Integration hub, a platform that can be easily integrated with biopharmaceutical or provider-facing platforms. This system facilitates real-time data sharing and helps orchestrate the services throughout the treatment development and the patient journey.
ABC's forward EV/Sales multiple of 0.15x compares to the industry average of 3.72%. The company's P/S forward multiple of 0.13 represents a 96.7% reduction compared to the industry average of 4.05x.
ABC announced that it would pay a dividend of $0.49 for each share of its common stock on May 30, 2009.
ABC pays an annual dividend of $1.94 for each share, a yield of 1.15% on the current market price. Dividend payments have increased at a CAGR 5.3% in the last three years. The average yield on the company's dividends over the past four years is 1.53%.
ABC's revenue grew 9.9% over the previous year to $63,46 billion for the second fiscal quarter ending March 31, 2023. ABC's non-GAAP net profit increased by 4.7% to $715.36 millions, and its non-GAAP earnings per share increased by 8.7% to $3.50.
Street estimates that ABC's revenues for the third fiscal quarter ending in June 2023 will increase by 5.5% over last year to $63.38 Billion. The company's earnings per share (EPS) for the same period is expected to rise 7.1% over the past year to $2.81. It has also surpassed consensus revenue and EPS estimates for each of the last four quarters.
The stock closed the last trading day at $168.21, a gain of 19.6% in the past nine-month period.
The POWR ratings reflect ABC's strong prospects. Our proprietary rating system gives the stock an A-rating, which is equivalent to a Strong Purchase.
ABC is rated A for Growth, B for Value, Stability and Sentiment. It is ranked second in the same industry.
Click here to view the POWR ratings for ABC (Momentum and Quality).
Cardinal Health, Inc.
CAH is a global healthcare company that provides integrated services and products in North America, Europe, Asia and other parts of the world. It offers customized solutions to hospitals, healthcare systems and pharmacies.
CAH launched the first-of its-kind Stray-Away hair management curtain on April 19 for more efficient preparation of surgical procedures. Cardinal Health designed and produced the Stray Away drape to minimize hair obstructing surgical areas and improve patient experience.
CAH's forward EV/Sales multiple of 0.11x compares to the industry average of 3.7x. The company's P/S forward multiple of 0.11 represents a 97.4% reduction compared to the industry average of 4.05
CAH pays an annual dividend of $1.98 for each share, which translates to a yield of 2.36% on the current stock price. Dividend payments grew at a CAGR (Compound Annual Growth Rate) of 1% in the last three years. The average yield on the company's dividends over the past four years is 3.53%.
CAH's revenues increased 12.6% over the previous year to $50.49 Billion in the third fiscal quarter that ended March 31 2023. CAH's net earnings were $345 million compared to $1.39 billion loss in the quarter prior. Earnings per common share attributable CAH were $1.34 compared to a negative $5.05 for the quarter before.
Analysts anticipate CAH's revenues for the fourth quarter of its fiscal year ending in June 2023 will increase by 11.6% over last year to $52,58 billion. Analysts expect its EPS to rise 40.7% over the past year to $1.48 in the same quarter.
The stock closed the last trading day at $84.15 after gaining 44.4% in the past year.
The POWR ratings reflect CAH's solid fundamentals. Our proprietary rating system gives the stock an overall rating A, which is equivalent to a Strong Purchase.
CAH has also been given an A for Value and Growth, and a B for Sentiment and quality. It is ranked number one in the same sector.
Click here to access additional ratings of CAH's Stability and Momentum.
MCK shares rose by $15.44 (+4.19%), in premarket trade on Tuesday. MCK shares have gained 2.52% year-to-date compared to the benchmark S&P 500 index which has risen 7.95% during the same time period.
Nidhi agarwal is the author.
Nidhi's passion for the capital markets and wealth management led her to pursue an investment analyst career. She has a Bachelor's Degree in Finance and Marketing and is currently pursuing the CFA Program. Her fundamental approach to analysing stocks helps investors identify investment opportunities.