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5 Top-Ranked MedTech Growth Stocks for Solid Returns

Zacks

Of late, the healthcare sector has been on a bumpy ride. With the Obamacare saga dominating the headlines, the industry has been grappling with multiple issues. After failing to repeal and replace Obamacare, Trump’s major “skinny repeal” also lost ground.

As per a report by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT), the abolishment of Obamacare will result in 17 million more of uninsured people in 2018, another 27 million in 2020 and the count is expected to rise to 32 million in 2026. The Medtech sector is expected to witness a decline in customer base after the elimination of Obamacare, indicating weaker demand for expensive medical procedures and devices.

However, if Obamacare stays, the dreadful 2.3% medical device tax imposed on the selling price is likely to take away a quarter’s profit of the Medtech players. This will also reduce capital-intensive research and development activities in the MedTech space.

In addition, the Cadillac tax will make sustainability difficult for small players in the competitive MedTech industry.


Hurricanes Worsen Scenario

Tensions escalated as the devastating Hurricane Harvey and Irma impacted the economy. Data from the American Automobile Association, Inc. suggests that the national price of a gallon of gas hit $2.67 on Sep 8, up from $2.35 a month ago.

Further, Bank of America estimates the loss of crops worth approximately $1.2 billion in Florida due to Irma, which will in turn lead to higher prices for groceries. Per statistics provided by a Labor Department official of the federal government, initial jobless claims had increased by 62,000, the highest since 2012. We believe rise in unemployment (though short lived) and decline in consumers’ income coupled with increasing aggregate spending are likely to deal a heavy blow to the MedTech industry.

5 MedTech Growth Stocks in Focus

These stocks carry a strong Zacks Rank #1 (Strong Buy) or 2 (Buy) and promise long-term expected growth of 15% or higher, comparing favorably with the broader industry. We also have taken a Growth Style Score of A or B into consideration.

Our Growth Style Score highlights all of the vital metrics of the company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities.

Lonza Group LtdLZAGY: Lonza Group supplies products and services to the pharmaceutical, biotech, and specialty ingredients markets worldwide.

The company sports a Zacks Rank #1 and has a long-term expected earnings growth rate of 15%. The projected EPS growth rate of the stock for a year stands at 22.4% compared to the broader industry’s projection of 6.9%. The company has a Growth Score of A and VGM Score of B.

The stock has gained 116.3% over the last three years, higher than the broader industry’s 24.1%.

OraSure Technologies, Inc. OSUR:The company develops, manufactures, markets and sells oral fluid diagnostic products and specimen collection devices in the United States, Europe and internationally. This Zacks Rank #2 stock promises long-term expected earnings growth of 16%. Notably, OraSure has a Growth Style Score of B. The projected EPS growth rate of the stock for a year stands at 38.6% compared to the broader industry’s projection of 6.9%.

OraSure has had an impressive run over the last three years. The company has returned 185.7%, significantly higher than the broader industry’s 24.1% over the same time frame.

LeMaitre Vascular, Inc. LMAT: The company markets, sells, services, and supports medical devices and implants for the treatment of peripheral vascular disease worldwide. LeMaitre has a Zacks Rank #2 and promises a long-term expected earnings growth rate of 15%. With a Growth Score of A, the stock has gained 441% over the last three years. The projected EPS growth rate of the stock for a year stands at 44.1% compared to the broader industry’s projection of 6.9%.

IDEXX Laboratories, Inc. IDXX: IDEXX Laboratories is a developer, manufacturer and distributer of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. This Zacks Rank #2 company has a long-term expected earnings growth rate of 19.8% and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories boasts a stellar return of 154.7% for the last three years. The projected EPS growth rate of the stock for a year stands at 26.9% compared to the broader industry’s projection of 17.9%.

Veracyte, Inc. VCYT: Veracyte is a diagnostics company. It is focused on discovering, developing and commercializing molecular cytology solutions. The stock carries a Zacks Rank #2 and a Growth Score of B. The company has a long-term expected earnings growth rate of 25% and projected EPS growth rate for a year of 21.8%, higher than the broader industry’s 17.9%. The stock has gained 20.3% over the past year compared to the industry’s 9.4%.

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