Healthcare should prosper with the accelerated advancements in telemedicine, personalized medicine and other areas. Moreover, with the lingering macroeconomic challenges, Amgen (AMGN) and Otsuka Holdings(OTSKY), which have A and B ratings for stability, could be good buys. Continue reading.
The US healthcare sector is huge and evolving, with technological advances and breakthroughs. The industry is resilient to macroeconomic headwinds due to the inelasticity of demand for its products and services.
This backdrop could make it wise to buy stable healthcare stocks Amgen Inc.(AMGN) or Otsuka Holdings Co. Ltd. (OTSKY). These stocks have been rated A or B in our POWR ratings system.
Manufacturers and providers are expanding their range of home tests to include those for sexually transmissible diseases, which is now considered a 'out of control' situation in the US.
Precedence Research estimates that the global market for home diagnostics will reach $8.15 Billion by 2030. Do-it-yourself health care is growing.
The pandemic, on the other hand has accelerated the move towards digitalization and telemedicine. These are all expected to be driving growth in the industry. Globally, the personalized medicine market will grow at a 10.9% CAGR to reach $540.12 Billion by 2028. Global healthcare is expected to reach $665.37 Billion by 2028.
The demand for small business healthcare services is also on the rise. This segment includes physician offices and dental labs as well as vision clinics and other local providers. Small healthcare practices will increase in number this year despite the industry's trend towards consolidation and large groups.
IBISWorld predicts that the number of primary care companies will increase steadily, at a rate of 1.6% per year, to reach 152 496 firms by 2027.
Amgen Inc. (AMGN)
AMGN is a global leader in the discovery, development, manufacturing, and delivery of human therapeutics. It is focused on areas such as inflammation, oncology/hematology and bone health.
AMGN's non-GAAP P/E ratio of 13.61, which is projected for the future, is 32.2% less than the industry average 20.12. The forward EV/EBIT Multiple of 11.60 is 32.2% lower than the industry's average of 16.66.
AMGN announced on March 7 a quarterly dividend payable June 8, 2023 of $2.13 for each share of common stock.
AMGN pays dividends of $8.52 per year. At the current market value, this translates into a dividend yield of 3.5% compared to a 4-year average of 2.90%. Dividend payments have increased at a CAGR 10.1% in the last three years. It has also paid dividends 11 consecutive years.
AMGN's sales of products increased by 4.5% to $6.55 Billion in the fourth quarter of its fiscal year that ended on December 31, 2022. The non-GAAP operating profit increased marginally from last year to $3.01 Billion, while the earnings per share was $3.
AMGN's revenue for the first fiscal quarter ending March 2023 is expected to be $6.19 billion. The EPS for the same period is expected to be $3.86. It has also exceeded consensus revenue estimates for each of the last four quarters.
The stock closed the last trading day at $243.46, up 3.7% in the past month. The beta is 0.64.
AMGN's Power Ratings reflect this positive outlook. The stock is rated B overall, which in our rating system translates into a Buy. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
It is rated A in terms of Quality, B for Value and C in terms of Stability. The stock is ranked #14 in the Biotech industry, which has 381 stocks.
Click here to view the POWR ratings of AMGN (Growth Momentum and Sentiment).
Otsuka Holdings Co., Ltd. (OTSKY)
OTSKY is a Japanese company based in Tokyo that engages in nutraceuticals and consumer products as well as other businesses around the world. The company produces pharmaceuticals in the areas of psychiatry and neurology, oncology and cardiovascular and renal systems, digestive system and ophthalmology. It also develops diagnostics and intravenous solution businesses, and medical devices.
OTSKY’s forward EV/Sales multiplier of 1.18, is 67.3% less than the industry median of 3.60. The company's forward EV/EBIT multiplication of 9.97 is 40% lower than the industry standard of 16.66.
OTSKY distributes $0.37 in dividends annually. At the current market value, this translates into a yielding of 2.28%. The average yield of dividends over the past four years is 2.32%.
OTSKY increased its revenue by 16% over the previous year to Y=1.74 billion ($12.93billion) for the fiscal year that ended December 31, 2020. The gross profit of Y=1.17 billion ($8.69billion) increased 16.5% over the previous year, while its profit for that year increased by 6.4%. Also, the company's EPS rose 6.9% over the past year to Y=246.99.
OTSKY is forecast to increase its revenue by 7.2% over the previous year to $3.15 Billion during the first fiscal quarter ending March 2023. It has also exceeded consensus revenue estimates for each of the last four quarters.
Stock has gained 10.4% in the past month, closing the last trading day at $16.41. The beta is 0.31.
The strong fundamentals of OTSKY are reflected by its POWR ratings. Our proprietary rating system gives the stock an overall rating A. This is equivalent to a Strong Purchase.
OTSKY has also been given an A for Growth, Value and Stability, as well as a B grade for Quality. It is ranked second in the same sector.
Click here to access additional ratings of OTSKY Momentum and Sentiment.
This special report contains 3 companies that are low-priced but have a tremendous upside potential, even in volatile markets today.
AMGN shares dropped $0.77 (-0.32%), in Friday's premarket trading. AMGN shares have fallen -6.49% year-to-date compared to an 8.11% increase in the benchmark S&P 500 Index 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 in Finance and Marketing and is currently pursuing the CFA Program. Her fundamental approach in analyzing stocks can help investors identify the best investments.