Australian healthcare shares have long been popular with investors, with their perceived defensive characteristics and growing demand over the long term. Many Australian healthcare businesses have done very well for shareholders over the long term.
Here's my take on whether these 3 are an opportunity today:
CSL Limited (ASX: CSL)
CSL is a blood product developer that has an astounding track record ever since listing in the 1990s. A combination life-changing products, continuous research & development (R&D) spending, and share buybacks have led to big improvements in earnings per share for shareholders. The company's future continues to look quite bright thanks to continued access to low-cost credit and an extensive R&D pipeline.
The downside is that CSL is priced accordingly at more than 30 times earnings, and its highest share price ever. This is the type of business that can be held for the very long term in my opinion, but I'd prefer to get it a bit cheaper.
Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
Fisher-Paykel is a medical device developer and manufacturer that competes with ResMed Inc. (CHESS) (ASX: RMD) in the obstructive sleep apnoea (OSA) market. The company has grown earnings and profits rapidly over the past few years, and has new products in the works that should improve both sales and patient outcomes. The portfolio of unique products (although this is partly in dispute, see below) and high spending on R&D should help the company grow profits at above-average rates over the long term.
I would consider buying shares of Fisher Paykel today, but the company has a patent dispute with ResMed which adds some uncertainty to the investment case.
Virtus Health Ltd (ASX: VRT)
Virtus Health is a fertility business that operates clinics across Australia, Ireland, and Singapore. With demand for fertility services growing across Australia, the company would appear to be in a sweet spot of high patient demand and a growing industry. Unfortunately, competition has been impacting the business recently and a downturn in activity has led to sharply lower sales and profits. This suggests a lack of competitive edge, which should discourage long-term shareholders.
Although Virtus is not an obvious winner, it's also not priced in the same way as most other Australian healthcare companies, and as such could be worth a closer look.
