The healthcare industry plays an inevitable role in providing necessary aids and solutions to the public. Factors like rising chronic diseases and rising demand for personalized medicine propel further requirements and demand for the industry, positioning it for long-term growth.
Amid the bright industry trends, it could be wise to invest in solid healthcare stocks Veeva Systems Inc. (VEEV), Align Technology, Inc. (ALGN) and Medpace Holdings, Inc. (MEDP), having high-profit margins.
Amidst the rising prevalence of chronic diseases, an aging population, and rise in recurring and debilitating diseases, health concerns and care are in the center of attention leading to robust growth for the overall healthcare industry. Healthcare services market is projected to grow to $22.57 trillion by 2031 at a CAGR of 8.3%.
The global projected revenue in the pharmaceuticals market is expected to be $1.15 trillion in 2024 with the oncology drugs market expected to be the largest, with market volume of $194.10 billion in 2024. Also, in global comparison, the US is expected to generate the highest revenue of $630.30 billion in 2024 boosted by its advanced healthcare infrastructure and strong R&D capabilities.
Further, the healthcare industry’s prospects are further propelled by supportive government initiatives, improving affordability and accessibility of pharmaceuticals, and recent advancements in technologies. The U.S. pharmaceutical market is estimated to reach $764.06 billion by 2030, exhibiting growth at a CAGR of 5.5%.
Besides, with its significant contribution to an economy’s well-being and development, expenditure on medicine has grown extensively. As per Centers for Medicare & Medicaid Services’ (CMS) projections, National Health Expenditures (NHE) are expected to exceed $5 trillion in 2024, and are anticipated to reach $7.70 trillion by 2032.
Given the robust economic outlook, investing in quality healthcare stocks such as VEEV, ALGN, and MEDP could be wise for substantial gains.
Veeva Systems Inc. (VEEV)
VEEV provides cloud-based software for the life sciences industry. It offers Veeva Commercial Cloud, such as Veeva customer relationship management, Veeva Vault PromoMats, Veeva Vault Medical, Veeva Crossix, Veeva OpenData, Veeva Link, and Veeva Compass.
VEEV’s trailing-12-month gross profit margin of 72.48% is 25.9% higher than the industry average of 57.59%. Likewise, the stock’s trailing-12-month EBITDA margin and levered FCF margin of 22.57% and 42.54% are significantly higher than the industry averages of 5.79% and 1.13%, respectively.
On June 19, VEEV and Vita Global Sciences entered a partnership to modernize clinical data management processes and improve collaboration with key trial stakeholders. With Veeva Vault EDC, the CRO is setting a foundation for study efficiency and faster study builds, which will deliver a better experience to patients, research sites, and sponsors.
On June 6, VEEV announced that Hangzhou Tigermed Consulting Co., Ltd. selected Veeva Vault EDC as its technology foundation for modern electronic data capture. With Vault EDC, Tigermed would simplify complex data management to achieve faster study builds and mid-study amendments with zero downtime.
Also, on May 16, VEEV unveiled Veeva Vault Basics, a new offering that includes technology, training, and support designed for biotechs. It equips fast-growing companies to deploy industry-leading Veeva Vault applications with zero implementation and maintenance costs.
This innovation bodes well with the company’s portfolio, and it will drive efficiency, speed, and compliance.
During the first quarter that ended April 30, 2024, VEEV’s total revenues rose 23.6% year-over-year to $650.34 million. Its non-GAAP gross profit increased 31.1% year-over-year to $491.78 million. The company’s non-GAAP operating income of $260.87 million indicates growth of 66.2% year-over-year.
Furthermore, the company’s non-GAAP net income came in at $246.95 million and $1.50 per share, up 66.9% and 64.8% from the prior year’s quarter, respectively.
According to the company’s financial guidance, VEEV expects total revenues between $666 and $669 million for the second quarter. It expects non-GAAP operating income from $265 to $267 million, and non-GAAP net income per share between $1.53 and $1.54 for the same period.
Further, for the fiscal year, the company expects total revenues of $2.70 billion - $2.71 billion. VEEV expects a non-GAAP operating income of $1.07 billion and a non-GAAP net income per share of approximately $6.16.
Street expects VEEV’s revenue for the second quarter (ending July 2024) to increase 13.2% year-over-year to $667.88 million. Its EPS for the same quarter is expected to grow 26.8% year-over-year to $1.53. Also, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
VEEV’s stock has surged 2% over the past month to close the last trading session at $181.93.
VEEV’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VEEV has an A grade for Growth and Quality. It also has a B grade for Sentiment. It is ranked #18 out of 63 stocks in the Medical - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of VEEV for Value, Momentum, and Stability. Get all VEEV ratings here.
Align Technology, Inc. (ALGN)
ALGN designs, manufactures, and markets Invisalign clear aligners, iTero intraoral scanners, and services for orthodontists and general practitioner dentists internationally. The company operates through Clear Aligner segment; and Imaging Systems and CAD/CAM Services segment.
ALGN’s trailing-12-month EBITDA margin and gross profit margin of 20.85% and 70.40% are considerably higher than the respective industry averages of 5.79% and 57.59%. Further, the stock’s trailing-12-month levered FCF margin of 12.19% is 982.8% higher than the industry average of 1.13%.
On April 1, ALGN announced that its Invisalign Palatal Expander System was included in the Australian Register of Therapeutic Goods (ARTG) and the New Zealand Web Assisted Notification of Devices Database (WAND), and made commercially available in both Australia and New Zealand.
The Invisalign® Palatal Expanders provides doctors an effective and easily removable alternative to traditional palatal expanders, without the need for metal and screws.
ALGN’s net revenues increased 5.8% year-over-year to $997.43 million during the first quarter that ended March 31, 2024. Its non-GAAP gross profit grew 5.8% year-over-year to $703.60 million. The company’s non-GAAP net income came in at $161.44 million and $2.14 per share, reflecting growths of 14.8% and 17.6% from the prior year’s quarter, respectively.
According to the company’s outlook, ALGN expects its revenues to be in the range of $1.03 billion to $1.05 billion for the second quarter. Also, for the full year, the company expects total revenue growth to be up 6% to 8% year-over-year.
Analysts expect ALGN’s revenue for the second quarter (ended June 2024) to increase 4% year-over-year to $1.04 billion, while the company’s EPS is expected to grow 4.2% year-over-year to $2.31 for the same quarter. Furthermore, the company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
Shares of ALGN have increased 1.3% over the past month to close the last trading session at $250.58.
ALGN’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B grade for Sentiment. Within the Medical – Devices & Equipment industry, ALGN is ranked #13 out of 134 stocks.
Click here to access additional ratings of ALGN for Growth, Value, Momentum, and Stability.
Medpace Holdings, Inc. (MEDP)
MEDP offers clinical research-based drug and medical device development services internationally. The company provides a suite of services supporting the clinical development process from Phase I to Phase IV in various therapeutic areas. The company offers clinical development services to the pharmaceutical, biotechnology, and medical device industries.
MEDP’s revenue and EBITDA have grown at respective CAGRs of 27.1% and 24.2% over the past three years. The company’s EBIT has increased 25.6% over the same timeframe, while its net income and EPS have improved at CAGRs of 25.1% and 32.5%, respectively.
MEDP’s trailing-12-month gross profit and EBIT margins of 66.44% and 18.07% are 15.4% and 871.5% higher than the respective industry averages of 57.59% and 1.86%. Likewise, the stock’s trailing-12-month levered FCF margin of 20.67% is considerably higher than the industry average of 1.13%.
For the first quarter that ended March 31, 2024, MEDP’s net revenue increased 17.7% year-over-year to $511.04 million. Its income from operations rose 20.7% from the year-ago value to $104.07 million. The company’s net income came in at $102.59 million and $3.20 per share, up 40.7% and 41% from the prior year’s quarter, respectively.
In addition, the company’s EBITDA of $115.65 million indicates growth of 24.6% from the year-ago value.
As per the company’s fiscal year 2024 guidance, MEDP expects net income between $347 million and $369 million and net income per share of $10.79 - $11.47. It also expects its EBITDA to range from $415 million to $445 million.
Analysts expect MEDP’s revenue and EPS for the second quarter (ended June 2024) to increase 14.7% and 30.9% year-over-year to $528.44 million and $2.53, respectively. Moreover, the company has surpassed the consensus EPS estimates in all of the four trailing quarters.
MEDP’s stock has surged 53.4% over the past six months and 76.7% over the past year to close the last trading session at $436.99.
MEDP’s POWR Ratings reflect its bright prospects. MEDP has an A grade for Quality and a B for Sentiment. The stock is ranked #22 among the 63 stocks in the Medical - Services industry.
To access MEDP’s other ratings for Growth, Stability, Momentum, and Value, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VEEV shares were trading at $180.17 per share on Thursday afternoon, down $1.76 (-0.97%). Year-to-date, VEEV has declined -6.41%, versus a 16.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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