3 Healthcare Stocks With Healthy Fundamentals
These three fundamentally sound companies will protect both your vitals and your financial livelihood for years to come.
There will always be a need for healthcare. Doctor visits, prescriptions, medical equipment, and of course, vaccines will remain fixtures in our society for decades to come.
This is what makes the defensive healthcare sector a good place to park funds for the long-term. Regardless of the economic or geopolitical landscape, quality healthcare products and services will be in constant demand.
There will also be constant demand for stocks with healthy fundamentals. Clean balance sheets, strong cash flow, and bright growth prospects are traits that investors have sought for decades and will remain marks of highly investable companies.
Put these two continuous demand sources together and you have a powerful investment strategy—buying healthy healthcare stocks. These three fundamentally sound companies will protect both your vitals and your financial livelihood for years to come.
What is the Best Pharmacy Stock?
CVS Health Corporation (NYSE: CVS) may be the best name to own in the pharmacy space on account of its clean bill of financial health. For starters, all three of its businesses are in growth mode, a sign of a well-diversified cash flow generator. In 2021, the company's pharmacy, benefits, and retail divisions recorded remarkably consistent revenue growth of 8%, 9%, and 10% respectively.
The results were not solely a one-hit pandemic wonder caused by the millions of Covid-19 tests and vaccines that were administered at CVS. Analysts are expecting top line growth to be in the mid-single digits over the next two years driven by steady demand for the pharmacy retailer's expanding lineup of healthcare offerings.
CVS is outperforming its peers due to the success of its omnichannel health strategy. The acquisition of health insurance giant Aetna is playing a big part by adding a range of new medical, dental, and behavioral health insurance products and services. New digital platforms and fresh store formats have also brightened the outlook for CVS. At 13x this year's earnings, investors should be picking up a prescription for CVS shares.
Is AmerisourceBergen Stock a Good Buy?
AmerisourceBergen Corp. (NYSE: ABC) offers the ideal combination of growth and value that many healthcare investors are after. The jack-of-all medical distribution trades derives reliable cash flow from supplying drugs, medical equipment, and home healthcare products to physicians and other healthcare providers.
ABC's top-line growth accelerated to 13% last year putting an exclamation point on a multiyear run of consistent growth. The company is a perennial winner when it comes to delivering strong financial results because the network it has formed is a rock-solid source of demand.
Despite pressures to switch to lower priced generic drugs, profit margins are expanding. Last quarter ABC's adjusted gross margin rose 66 basis points to 3.4%, setting the tone for what the Street is forecasting will be a second straight year of high double digit EPS growth.
Like its earnings trajectory, ABC's balance sheet is also in great shape. A 20% year-over-year increase in the cash balance to $3.2 billion and above industry debt coverage ratios have the company in a favorable position to launch new products, form new partnerships, and make more value-added acquisitions.
Speaking of value, ABC shares can be had for 20x earnings compared to its peer group average of 23x. A dividend that has been increased for the last 18 years also makes this industry leader a healthy long-term value.
Is it Too Risky to Buy Moderna Stock?
Moderna, Inc. (NASDAQ: MRNA) is a name that will be forever linked with the coronavirus pandemic. Yet the company deserves to be equally synonymous with strong fundamentals.
Given the revenue generated by its Covid vaccine, Moderna's astronomical growth metrics have been well documented and are what propelled the stock above $400 last year. But there's more under the hood.
The balance sheet is among the best in a biotech industry that's not known for its financial stature. Debt comprises just 2% of Moderna's capital structure and a 1.4x current ratio portrays a business with good liquidity. And with nearly $9 billion of cash on the books, the opportunities to pursue growth in the post-pandemic world will be extensive.
Concerns around where Moderna goes after its Covid vaccine opportunity fades are a major part of why the stock has plummeted in recent months. They are concerns that are well-founded given that mRNA-1273 is the company's only commercialized product. However, there is more coming down the pipeline that gives reason for optimism—and to buy Moderna shares on sale.
Moderna has several promising therapeutic candidates targeting a range of cancer types and rare diseases. Its personalized cancer vaccine and myocardial ischemia candidates are in phase 2 studies. Meanwhile, collaborations with AstraZeneca and Merck help legitimize the company's development program, not to mention its upcoming single dose Covid/flu booster which is in early stage development.
Moderna has been labeled a one-trick pony that is overly dependent on its Covid vaccine. That may be the case right now, but given its healthy financials and potential to remain a global health care innovator for years, the risk-reward looks favorable here.
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