Some of the most successful shares over the last few years have been businesses tapping into society’s desire for better healthcare.
Hospitals owned by Healthscope Ltd (ASX: HSO) and insurance provided by NIB Holdings Limited (ASX: NHF) are important parts of the healthcare process, but it’s the medical device companies that can provide the explosive growth for shareholders.
Here are three medical device companies that I think would make good investments:
Nanosonics Ltd. (ASX: NAN) is a provider of hospital disinfectant medical devices called Trophon and has a market capitalisation of $925 million.
In FY17 it grew sales by 93%, net profit after tax and cashflow were also both positive for the first time at $122,000 and $1.9 million respectively. There is large potential for growth because it has tapped less than 25% of its potential market in the USA. There is a similarly large potential market in Europe too.
Nanosonics is trading at 54.5x FY17’s estimated earnings and doesn’t pay a dividend yet.
Lifehealthcare Group Ltd (ASX: LHC) is supplier of a number of different medical devices relating to surgery with a market capitalisation of $101 million.
The key to growth for Lifehealthcare will be the number of surgeons using its devices. In FY16 the number of surgeons using its products grew by 17% to 111 surgeons. This resulted in underlying earnings before interest, tax, depreciation and amortisation growing by 11.6%.
Lifehealthcare is trading at 10x FY17’s estimated earnings with a dividend yield of 5.29%.
Paragon Care Ltd. (ASX: PGC) supplies a wide range of products such as clinical refrigerators, ultrasound systems and emergency trolleys to hospitals, medical centres and aged care facilities. It has a market capitalisation of $133 million.
In FY16 it grew revenue by 190%, earnings per share by 75% and the dividend by 57%. These are impressive numbers for any company and bode well for FY17 too as the business continues making acquisitions.
Paragon Care is trading at 12.6x FY17’s estimated earnings with a grossed up dividend yield of 3.88%.
All three of these businesses look like compelling potential investments. Healthcare will always be in demand and should keep growing as the Australian population ages. Paragon and Lifehealthcare are both trading at reasonable valuations and pay a dividend, so they would be my choices if I had to narrow it down to two.
If medical device companies aren’t your preferred type of investment, perhaps these three growing blue chips would be better to consider.
These 3 stocks could be the next big movers in 2020
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET. The Motley Fool Australia owns shares of Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.