Small-cap Healthcare Shares Outperform
The chart above compares the shares of these three small-cap healthcare companies to the ASX’s blue chip shares index, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). While I have cherry-picked the companies, clearly, they have handily outperformed the market over five years.
Pro Medicus is one of my favourite small companies on the ASX. It has developed a lightweight software solution for doctors and radiologists to send and receive medical images, like X-Rays.
Its share price performance in recent years reflects its numerous contract wins with major hospitals.
It is obvious that Pro Medicus shares are more richly priced than they once were. However, if it continues to win new contracts with hospitals it could be worth a long-term investor’s time and capital.
Paragon Care is a not a ‘sexy’ healthcare technology company like Pro Medicus and Nanosonics — it supplies medical equipment to the domestic and Kiwi aged care and health markets. Paragon Care is also small, with the entire company worth around $150 million.
However, it offers a handy dividend and its valuation does not appear excessive to me.
Nanosonics is not so much a ‘small cap’ anymore since it has grown rapidly to become an $800 million business. Nanosonics makes and markets its flagship product known as Trophon, an ultrasound probe and disinfector. Like Pro Medicus’ device, Nanosonics’ is a more effective and cheaper alternative to the legacy systems currently in use in many hospitals.
They may be smaller companies but I think Pro Medicus, Paragon Care and Nanosonics shares should be on every long-term ASX investor’s watch list. However, they should be considered higher-risk than some other companies on the ASX.
Motley Fool contributor Owen Raszkiewicz has no position in any of the stocks mentioned. 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.
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