3 Medical Device Companies for the Long-Term Investor
With global healthcare conditions beginning to normalize and demand for medical devices healthy again, the diagnosis for industry growth is favorable.
Like most industries, the global medical devices industry suffered a major setback due to the pandemic. As containing the coronavirus became priority number one, surgeries and other procedures were delayed leaving little need for hospitals to order new medical devices.
Things improved dramatically in 2021. Vaccine rollouts paved the way for deferred procedures to be scheduled and created sizable order backlogs at many medical device companies.
With global healthcare conditions beginning to normalize and demand for medical devices healthy again, the diagnosis for industry growth is favorable. According to Fortune Business Insights, an aging population and increased healthcare spending worldwide will add approximately $200 billion to the global medical device market over the next seven years.
Investors looking for ways to participate in this growth have several alternatives from heart device makers to glucose monitoring specialists to robotic surgery systems. Some of the brightest growth prospects in the space belong to these three companies.
Is Medtronic a Good Buy and Hold Stock?
Medtronic Plc (NYSE: MDT) is one of the top medical device companies in the world and one of the most diversified ways to invest in the industry. It has strong market positions across a number of large medical technology markets including cardiovascular, spine, and diabetes. From coronary stents to gastrointestinal devices to insulin pumps, Medtronic products are the top sellers in 14 categories.
The company's ability to differentiate itself in a highly competitive market is leading to share gains in its three largest businesses—cardiac rhythm, spine, and surgical navigation. The cash flow generated in these and other product areas are reinvested in the development of new products, creating a continuous cycle of innovation and growth. Medtronic is also active when it comes to making acquisitions that enhance its product offerings and competitive position.
From a geographical standpoint, Medtronic's biggest growth opportunity is in emerging markets where growth is currently trending in the double digits. As developing economies improve their healthcare, Medtronic's vast medical device portfolio is expected to play a key role in the advancement.
What Does DexCom Do?
DexCom, Inc. (NASDAQ: DXCM) specializes in the manufacturing and marketing of continuous glucose monitoring, or CGM systems. Its technology helps patients with diabetes manage their glucose levels without finger pricking or other uncomfortable traditional approaches.
People may recognize DexCom for its 2021 Super Bowl commercial in which Nick Jonas promoted the DexCom Warrior device and associated app. Yet having been around since 1999, the company has been at the forefront of the CGM market for some time.
Diabetes has also been prevalent in our society for a long time, but is surprisingly still a largely unmet medical need. Last year, an estimated 537 million adults around the world were diagnosed with diabetes. Despite the fact that nearly $1 trillion was spent on diabetes-related conditions, many still lack access to advanced care.
That means DexCom's runway for growth both in the U.S. and abroad remains long. IDF Atlas estimates that the ranks of diabetes patients will rise to 783 million by 2045. Along the way, access to tech-enabled CGM systems will improve, leading to decades of healthy growth for DexCom investors.
Will Intuitive Surgical Stock Go Up?
Intuitive Surgical, Inc. (NASDAQ: ISRG) is the leader in the very exciting and promising field of robotic surgery. Since robot-assisted surgical procedures lead to better outcomes and involve faster recovery periods (i.e. shorter hospital stays), medical providers are expected to increasingly embrace the technology to improve results and reduce costs. It makes sense then that robotic surgery is considered to be one of the biggest growth opportunities in the medical device industry.
As a pioneer in the space, Intuitive Surgical's da Vinci robotic surgical system has been performing minimally invasive procedures for years in hospitals worldwide. Physicians have employed the da Vinci system for more than 10 million procedures, including over 1.5 million last year. Despite the challenges presented by the pandemic, procedure volumes have grown at a 14% rate over the last three years.
The recent growth at Intuitive Surgical is just the tip of the iceberg. That's because robotic surgery has thus far penetrated the broader surgery market by only 2%. The technology is expected to become more prevalent worldwide as hospitals learn about its benefits and healthcare expenditures increase.
Intuitive Surgical stock has pulled back approximately 20% from its recent peak presenting an attractive entry point for long-term investors. The lofty P/E shouldn't be a deterrent considering the growth ahead.
For the remainder of the decade and beyond, more and more surgeons will be adopting the da Vinci platform. The results will be better outcomes for patients—and positive outcomes for Intuitive Surgical shareholders.
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