There are a wide variety of healthcare shares out there. Private hospitals, aged care facilities, equipment providers and treatment creators are all potential options.
Another growth area could be pharmacies like Priceline owned by Australian Pharmaceutical Industries Ltd (ASX: API) and Amcal owned by Sigma Healthcare Ltd (ASX: SIG).
Why drug stores?
The good thing about pharmacies is that they're exposed to two (or three) different growth areas.
The first growth area is the rising use of medicine and supplements.
Companies like Blackmores Limited (ASX: BKL) and Swisse have created strong brands and the pharmacies are benefiting from this.
The Australian population is steadily ageing and this means we are more likely to need prescription medicine or at least some form of relief. Again, pharmacies are benefiting from this growth. Companies like CSL Limited (ASX: CSL) and Glaxosmithkline are also profiting from this.
The skincare and beauty industry is also steadily growing. Classic brands like Rimmel, L'Oreal and Maybelline are steadily growing but it's natural brands like BWX Limited's (ASX: BWX) Sukin that are particularly doing well.
In BWX's recent Andalou Naturals purchase presentation, it outlined that the natural segment of the US personal care industry is expected to grow at a compound annual growth rate (CAGR) of 8.3% in the medium-term whilst the broader personal care market will only grow at 3.8% according to research done by Kline & Company in 2017. I expect the trend is very similar here in Australia.
Australian Pharmaceutical Industries just released its annual results which included revenue growth of 5.8% and underlying net profit after tax growth of 5.4%. This is off the back of several years of good growth and I think there could be more growth to come.
Foolish takeaway
Australian Pharmaceutical Industries is trading at 14x FY18's estimated earnings with a grossed-up dividend yield of 5.95%.
Sigma is trading at 15x FY18's estimated earnings with a grossed-up dividend yield of 9.47%.
Both shares aren't trading expensively and both could be a decent buy. Out of the two I prefer Australian Pharmaceutical Industries because I believe Priceline is a stronger brand.
