Panic triggered by the intensifying impact of the coronavirus pandemic has been weighing heavy on investors. Some of the most crucial global benchmark indices have been witnessing drastic falls since the onset of the pandemic, aggravating the concerns.
Despite the market rebounding and unemployment rate dropping around May-end, the report of a slew of fresh coronavirus cases due to rushed reopening of the economy has dealt a fresh blow to investor optimism. Per an article published in The Guardian in May, the IMF projects a 3% contraction of the global economy in 2020.
How Bad is it for MedTech?
The MedTech industry has been one of the hardest hit by the pandemic. This is primarily because of worldwide manufacturing and supply chain disruptions as well deferral of elective medical/surgical procedures. Several MedTech firms, particularly those that specialize in dental equipment supplies and cardiovascular procedures, reported huge revenue losses in the first quarter of 2020. The uncertainty regarding the impact and extent of the pandemic has caused most leading companies to slash or withdraw their guidance for the full year.
Companies like Edwards Lifesciences EW, Stryker SYK and Zimmer Biomet ZBH are a few that have been witnessing more than a 10% fall in their share prices, significantly underperforming their respective industries over the past six months.
Needless to say, investors are currently getting skeptical about betting on MedTech stocks.
Looking at the Brighter Side
While the free fall in MedTech stocks is quite a dampener, it makes a number of fundamentally solid stocks attractive picks for value investors. It is to be noted that during the pre-pandemic time, most of such stocks were actually expensive based on their otherwise robust long-term growth parameters.
Taking this into consideration, we believe it is prudent to bet on stocks which are currently trading at a discount but have long-term growth potential. Value stocks are undoubtedly the best bet now as these are most likely to outperform growth stocks once the economic mayhem ends.
3 Stocks to Bet On:
Here are a few MedTech companies with a Value Style Score of A or B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Laboratory Corporation of America Holdings LH: In June, this Zacks Rank #2 company launched a test that can be used to evaluate the capacity of antibodies in patient plasma to restrain the SARS-CoV-2 virus. Soon after, the company’s Covance Drug Development business came up with aXcellerate COVID-19 solution. The company has a Value Score of B.
The company’s P/E and PEG ratios are both discounted compared to the industry, indicating that the stock is currently trading cheap. Over the past month, the company’s shares have underperformed the industry. The stock has lost 6.7% compared with the industry’s 4.4% decline. However, for 2021, earnings growth rate is anticipated at 36.3% versus the industry’s 34.7%.
Patterson Companies PDCO: This Zacks Rank #2 company has been gaining on a broad spectrum of products, which has cushioned it against economic downturns in the MedTech space. Robust dental sales driven by strong growth in equipment sales, sustained improving trends in consumables and robust demand for value-added services have been benefitting the company. Its Animal Health business is well-poised to drive the top line. The company continues to gain from the acquisition of VetIT – a leading cloud-based practice management software in the U.K. It has a Value Score of B.
The company’s PE and PEG ratios are both discounted compared to the industry, indicating that the stock is currently trading cheap. Over the past year, the company’s shares have underperformed the S&P 500 Index. The stock has lost 2.2% against the index’s 5.7% growth. However, for fiscal 2022, its earnings growth rate is anticipated at 25.2% against the S&P 500 Index’s (2.9%).
Cerner Corporation CERN: Since April 2020, this Zacks Rank #2 company has been offering select U.S. health systems and academic research centers complimentary access to crucial de-identified COVID-19 patient data. In June, North Central Health Care selected Cerner to implement the latter’s electronic health record (EHR) at three multi-specialty behavioral health care facilities across Wisconsin. The company has a Value Score of B.
The company’s P/S and PEG ratios are both discounted compared to the industry, indicating that the stock is available at a discounted price. In the past three months, the company’s shares have underperformed the industry. The stock has gained 8.8% compared with the industry’s 38.7% growth. However, for 2020, earnings growth rate is anticipated at 5.9% against the industry’s (0.1%).
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Stryker Corporation (SYK) : Free Stock Analysis Report
Cerner Corporation (CERN) : Free Stock Analysis Report
Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report
Patterson Companies, Inc. (PDCO) : Free Stock Analysis Report
Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
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